Motorcycle insurance monthly payments can work out to 74% APR
Motorcycle insurance monthly payments are more expensive than paying for the policy upfront – with one provider charging an APR rate of 73.8%.
Most bikers are aware that it costs more to pay for your policy in instalments, but just how much more may not always be clear, especially when using comparison engines.
Biker & Bike has conducted a quote survey and found that, on average, insurance providers can charge 15% extra when you pay by instalments. The average APR across the motorcycle insurance quotes we obtained was nearly 40%.
One insurer, MCE, wanted an extra 25% on top of the annual premium, which equates to an APR interest rate of 73.8% once fees have been added in. To make matters worse, the rate for the policy is not revealed during an online quote until an online buyer clicks on a small text link towards the end stages of the quotation. Worryingly, the buyer does not have to read the link – they can just check a box saying that they have read it. Meaning a large number of MCE policyholders could be completely unaware of how much they are being charged for the credit facility with the insurer.
Carole Nash, operating under the brand names Express Insurance Services and Carole Nash Scoot & Commute charge an APR of 56.64% for payments made over nine months at a fixed rate of 20%. To discover this rate, we had to go through an entire online quotation process that took around 10 minutes.
Typical APR rates for motorcycle insurance
Using the comparison site The Bike Insurer we asked for quotes for a 50-year-old male, with no convictions or accidents, to insure a Suzuki GSX-S1000, garaged in one of London’s highest risk areas, 9+ years NCB with protected no claims cover.
We found that before clicking through to the insurer’s quote, the only information provided was the annual premium and a total amount if paying by instalments (along with the full excess amount). Crucially for anyone looking to pay by instalments, the APR percentage was not quoted on the comparison site. Displaying the APR would instantly show which insurers were providing the most expensive credit terms.
Through our quote we found the most popular brokers and direct sellers were charging:
AA: 36.6% APR
Bennetts: 33.8% APR
Carole Nash: 56.64% APR
Devitt: 39.9% APR
Motorcycle Direct: 36.6% APR
Swinton: 35.6% APR
We were also surprised to find out the motorcyclist’s rights organisation BMF were charging around 33.6% APR. Their quote would add an extra £136.21 to the cost of an annual policy if you used their instalments options.
Most quotes ranged between £800 and £1,100 with an average total excess of £850. The exception was again MCE, who came in with a staggeringly low £357 annual premium. To get that premium the buyer needs to accept an excess of £2,000. Anyone considering taking out a policy with such a high excess should consider taking out a separate policy to cover the excess in case of an accident or theft.
How can you reduce your monthly costs?
Leaving MCE’s extraordinary quote to one side, we found the average increase in cost across 13 providers was just under 15%. The average APR across 15 providers (again excluding MCE) was 38.08%. By comparison, the average APR for balance transfer credit cards is 19.2%.
Low rate credit cards’ average APR is just 6.4% making it an attractive option if you cannot pay the annual premium in one go. Do bear in mind that some insurance brokers and direct sellers might add a fee for paying by credit card.
To avoid those fees, another option is a personal loan. The best rate available according to Money Saving Expert is currently 6.7%. The downside is you have to arrange the loan up front, but the upside is you know exactly how much your insurance will cost you over the year – using a low rate card can be tricky if you are juggling low rate periods and special offer rates.
Again, excluding MCE’s quote, if you take the average quote of £938.77 for an annual premium, a personal loan would work out to a total amount repayable of £972.16. That’s an extra cost of £33.39. The average additional cost of paying by instalments with credit provided by the insurer is £138.18.
Get yourself sorted:
Do some legwork up front and arrange a personal loan or use a low rate credit card. It could save you in the region of £100 on your motorcycle insurance yet still allow you to spread the cost.
All figures correct at the time of writing (26.6.18)
How APR interest rates work: https://www.moneyadviceservice.org.uk/en/articles/interest-rates-explained
Source: Credit card interest rates: https://www.nimblefins.co.uk/average-credit-card-interest-rate-apr-uk
Source: Personal loan rates: https://www.moneysavingexpert.com/loans/cheap-personal-loans/