UK motorists are still being charged exorbitant interest rates when spreading the cost of car insurance, according to new analysis by Which? The consumer group found that some insurers levy annual percentage rates (APRs) comparable to expensive credit cards, with certain firms charging close to 30%.
High APRs Persist
Between February and March 2026, Which? found several companies charging APRs above 25%, with some reaching as high as 29.9%. This is down from over 35% two years ago, but the group says progress is too slow.
Which? contacted 61 car insurance brands; 48 responded with their rates or confirmed no extra charge for monthly payments.
Poverty Premium
Rocio Concha, director of policy and advocacy at Which?, said: "Millions of motorists rely on monthly payments to afford essential car insurance cover, yet many are still being charged interest rates comparable to an expensive credit card." Paying monthly is often the only option for households under financial strain, creating a so-called "poverty premium."
Industry Response
A spokesperson for the Association of British Insurers (ABI) said: "The industry recognises that many households are under financial pressure and understands why spreading the cost of cover is essential for many motorists. Premium finance is widely used with charges that differ between insurers and product."
ABI members remain committed to improving outcomes, including being open about genuine operational costs such as keeping cover in place when payments are delayed or missed. Their premium finance principles require charges to be fair, transparent, and reflective of costs incurred. The FCA's market study found premium finance can deliver fair value, and overall costs have fallen since 2022.
