Martin Lewis has said he has been left 'shocked by how many' people are making a costly car insurance mistake he says you should 'avoid if at all possible'.
Lewis made the claim on X, formerly Twitter, after creating a poll for his followers to vote in on Tuesday morning (8 October).
The Money Saving Expert founder asked how people went about paying for their annual car insurance premiums when it came time to renew their policy.
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"Today's Twitter Poll: How do you pay for car insurance? Do you pay it in a lump sum, or put it on a credit card or pay monthly. Which of these is CLOSEST to your situation," he wrote.
Lewis gave four answers, those being annually from your bank; monthly direct debits; annual via credit; or you don't have car insurance.
The results left the finance guru wide-eyed, with roughly one third of the 28,000-plus voters saying they opted for the monthly direct debit option that is given by car insurance providers.
With this in mind, he issued a new warning on exactly what you are signing up to when you choose this option. And it's all to do with something called Annual Percentage Rate (APR); financial speak for the amount added to the total fee of a product.
Lewis wrote on X: "WARNING: Monthly direct debit is a LOAN. They pay the year for you and loan you the money often at 20 percent to 40 percent APR way more than a typical credit card.
"I'm shocked by how many pay by monthly direct debit. Avoid if at all possible."
Replying one fan pointed out that a lot of people cannot afford to pay their car insurance in one go. They replied to Martin: "Of course it’s a loan. However, the majority of people in UK cannot afford to pay yearly amount in a lump sum, especially with how insurance companies are inflating prices.
"This way at least enables people to budget and manage their finances."
Another wrote: "You live in a different world Martin. Out in the sticks a lot can't fork out hundreds of pounds at once."
And a third posted: "You’re shocked that people can’t afford to pay more than their monthly direct debit for credit they’ve obtained? Did you forget who you are for a second?"
But Lewis has an answer for almost anything. Instead of opening up a direct debit, Lewis recommended going down routes will less interest to avoid the extra cost.
He explained: "My point is it's a COSTLY loan. If you have to, most would be far better to put it on a zero percent credit card and repay it over the 12 months. Or even a standard high street card with APR 20 percent undercuts many big insurers who charge up to 40 percent APR."
With car insurance prices rising by an extra 34 percent in the year to May 2024, saving the pennies in your renewal seems more important than ever.
Topics: Cars, Driving, Martin Lewis, Money, UK News
Tom Earnshaw