{"id":525217,"date":"2024-04-23T21:57:16","date_gmt":"2024-04-23T20:57:16","guid":{"rendered":"https:\/\/www.finder.com\/uk\/?p=525217"},"modified":"2026-02-05T16:05:07","modified_gmt":"2026-02-05T16:05:07","slug":"paying-annually-vs-monthly","status":"publish","type":"post","link":"https:\/\/www.finder.com\/uk\/car-insurance\/paying-annually-vs-monthly","title":{"rendered":"Paying annually vs monthly for car insurance"},"content":{"rendered":"

With car insurance premiums on the rise, it makes sense to look for ways to keep costs manageable. Many insurers let you spread payments for your annual premium across the year, which can help with budgeting. But additional fees mean that paying monthly could cost you more in the long run. We outline the pros and cons of paying annually vs monthly for car insurance, and other ways to keep premiums down.<\/p>

How can I pay for my car insurance?<\/h3>

For standard car insurance policies, which typically last for a year before needing renewal, there are two main ways to pay.<\/p>

  1. In a single, up-front annual payment.<\/li>
  2. In monthly instalments.<\/li><\/ol>

    When you get a quote for car insurance, directly with an insurer or via a price comparison site or broker, you\u2019ll usually be shown both payment options.<\/p>

    You can also get temporary car insurance<\/a>, which lasts for anything from a few hours to 30 days. Because temporary car insurance is for the short term, you\u2019ll typically pay for it in one go (though you may be able to extend your cover for an additional premium).<\/p>

    What does paying annually for my car insurance involve?<\/h3>

    Paying annually for your car insurance is pretty straightforward. Once you\u2019ve completed the quote process and selected an insurer, your chosen insurer will tell you the cost of your annual premium, including any optional extras. Usually, the quoted price will be held for up to 30 days, to give you a chance to make up your mind.<\/p>

    When you\u2019re ready, it\u2019s a simple case of making the annual payment. Payment methods usually include debit card, credit card and, in some cases, bank transfer. Cover can start on the date you make payment, or a few days later, if you prefer.<\/p>

    What does paying monthly for my car insurance involve?<\/h3>

    Paying monthly for your car insurance, as you\u2019d expect, involves splitting your car insurance premium over multiple monthly instalments. You make one up-front payment at the start of the policy. This is followed by 11 (or occasionally 10) subsequent monthly payments that are taken using the same payment details you supplied at the outset.<\/p>

    So far, so straightforward. But if you want to pay monthly, there are a couple of things to be aware of.<\/p>

    1. The first payment you make is likely to include an initial deposit (20% of your premium is typical). This means your initial payment will usually be higher than subsequent payments.<\/li>
    2. When you pay in monthly instalments, insurers are effectively lending you part of the cost of the policy. Because of this, most insurers apply interest. This means that you\u2019ll end up paying more by the end of the year than you would have if you\u2019d paid in full, up-front.<\/li><\/ol>

      How are monthly car insurance payments calculated?<\/h3>

      When you run a quote for car insurance, you\u2019ll be quoted two prices; to pay annually, and to pay in monthly instalments. The cost of paying in monthly instalments will include the interest that the insurer applies. There\u2019s no \u201cset\u201d interest rate for car insurance monthly payments \u2013 it will vary between insurers, so you\u2019ll need to compare carefully.<\/p>

      Some insurers split the total annual premium, equally including interest, across 12 (or sometimes 11) monthly payments. But most charge a higher up-front payment (including a deposit), and split the remainder equally over subsequent months.<\/p>

      Is it better to pay for my car insurance annually or monthly?<\/h3><\/div>

      \"Danny<\/p>

      Finder insurance expert Danny Butler<\/a> answers <\/em><\/div><\/div>

      It depends what you mean by better. If by \u201cbetter\u201d you mean \u201ccheaper\u201d, then the answer is almost always annually. That\u2019s because by paying annually, up-front, you won\u2019t incur the extra interest charges that most insurers apply if you pay monthly.<\/p>

      But with the average annual car insurance premium sitting at \u00a3627 as of January 2024, and frequently topping \u00a31,000 for younger, less experienced drivers, taking the financial hit all in one go isn\u2019t always viable. If this is the case, monthly payments could help you to manage your budget.<\/p>

      You\u2019ll get the same features and the same level of cover from an insurance policy whether you pay annually or monthly, so what\u2019s best is really down to your personal circumstances.<\/p><\/div><\/div><\/div><\/article>

      Do I have to pay a deposit when I take out car insurance?<\/h3>

      In many cases, yes. When you pay monthly, most insurers require you to make a larger proportional up-front payment \u2013 usually between 15 and 25% of the total premiums for the year.<\/p>

      A few insurers offer \u201cno-deposit\u201d car insurance policies, where the monthly instalments are split equally. This could lower the initial amount you need to pay, but you\u2019ll need to weigh up this benefit against the total cost of the policy.<\/p>

      Does paying monthly for my car insurance affect my credit rating?<\/h3>

      It can do, in a couple of ways.<\/p>

      Firstly, paying monthly effectively means taking out a loan (aka applying for credit) with an insurer. Simply getting quotes, for example via a price comparison site, won\u2019t have an impact on your credit rating. But when you\u2019ve selected a provider and complete the application process, it will run a credit check that will appear on your credit file. Be aware that multiple checks on your file in fairly quick succession can have a negative impact on your credit rating. So it\u2019s best to review the details of a policy before you complete the application, so you can feel confident it\u2019s the one you want and avoid the need to make multiple applications.<\/p>

      Secondly, once you have the insurance policy, how good you are at keeping up payments can also affect your credit rating. Making all of your payments on time can help prove your credit-worthiness and boost your credit score, particularly if it was on the low side to start with. But if you are late with or miss any payments, this could have a negative impact on your credit score. This could potentially affect your ability to get affordable credit with other providers in the future.<\/p>

      Can I use a credit card to pay for my car insurance?<\/h3>

      Many car insurance providers let you make up-front annual payments via credit card. Provided that your credit card provider charges a lower interest rate than your car insurer, it can be a good way to spread the cost of your premium over several months. If your credit card provider charges a higher rate of interest than your car insurer, and you can\u2019t afford to pay the credit card debt off in within a month or two, then you\u2019d likely be better off using your car insurer\u2019s pay-monthly option.<\/p>

      If you have a 0% credit card<\/a>, and will be able to pay the full amount of your premium off within the interest-free period on your card, this could allow you to spread your car insurance payments without incurring any additional costs.<\/p>

      How can I cut the cost of my car insurance?<\/h3>

      Paying your full annual premium up-front is one way to keep the cost of insurance down, but this isn\u2019t always financially practical. Other tactics you can use include:<\/p>