What's Changing
Nothing, for now. This is a campaign by the consumer group Which?, not a new rule. Which? is calling for an end to extra charges for paying monthly for car insurance. It's urging the Prime Minister to announce a ban on what it calls two-tier pricing for motor insurance in the upcoming Budget.
No government or Budget commitment to a ban has been announced. The FCA has decided against a cap, so firms can still charge interest on monthly payments.
The FCA calls paying monthly premium finance. You pay a deposit, then set repayments with interest, shown as an APR.
When It Starts And Who It Affects
There's no start date, because nothing has been decided. The official position is still the FCA's final report on premium finance, published on 3 February 2026. It found that a price cap or ban on interest for monthly payments isn't warranted.
The FCA says a cap, or making firms offer interest-free monthly payments, could restrict access to cover for people who can only afford to pay monthly. Around 48% of motor and home policies were paid this way in 2023, about 23 million policies, often because people couldn't afford to pay annually.
The FCA isn't planning market-wide changes. It says it's continuing to monitor prices and fair value, and says it's ready to act if firms fall short. Under the Consumer Duty, in force since 2023, firms have to show the price you pay is reasonable for the benefits you get.
What It Means For Your Car Insurance
Paying monthly can cost more than paying upfront, because many monthly plans charge interest (an APR). Here's how the car insurance payment options work.
The FCA's figures show rates have come down. Average APRs among firms in its sample fell from 23.3% in 2022 to 19.2% in 2026. It puts the saving at about £8 a year on a typical motor policy. Rates also vary by who lends to you. In 2023 the average was 13% through brokers and 10% through insurers. Some providers already offer 0% APR.
Which?'s own research looked at one driver's quotes. In August 2026 it looked at 36 online quotes for one 42-year-old driver in Yorkshire. Half carried APRs over 25%, and seven were over 30%, including two over 50%. Which? says this is a snapshot for one driver, not the whole market.
If you're weighing up how to pay, you can compare car insurance quotes when you're ready.
Paying Monthly Vs Paying Upfront
What the FCA's premium finance study found, plus Which?'s own snapshot, clearly labelled.
| Paying monthlyPremium finance, a form of credit | Paying upfrontThe full price in one go | |
|---|---|---|
| How you pay | A deposit, then set repayments, with an APR | The total cost of the policy, paid upfront |
| Interest (FCA) | Average APR 19.2% in 2026, down from 23.3% in 2022. Some providers offer 0% APR | Paid in full, no repayments |
| Who uses it (FCA) | Around 48% of motor and home policies in 2023, often because people couldn't afford annual payments | Means paying the annual price at once |
| What you can check (FCA) | Total cost with premium finance, deposit, number and size of repayments, and APR | Total cost of paying upfront, shown alongside |
| Which?'s snapshot (one driver, 36 quotes, August 2026) | Half had APRs over 25%. For 22 quotes, paying monthly cost 10% to 16% more | Which? found only two providers didn't charge extra for paying monthly |
From the FCA's premium finance market study MS24/2 final report (3 February 2026) and FCA press release. Which? figures are Which?'s own research for one driver, not the whole market.
What To Do Now
- Check both totals. After you pick a quote, you can compare the total cost of paying upfront with the total cost of paying monthly.
- Look at the APR. Check the deposit, the number and size of repayments, and the APR before you agree.
- Ask about missed payments. If you're paying monthly, ask your insurer or broker what happens if a payment is missed.
- Keep an eye on the Budget. Which? wants a ban in the Budget. As of 16 October 2026, none has been announced.
FAQs
Has Paying Monthly For Car Insurance Been Banned?
No. Which? is calling for a ban on extra charges for paying monthly, but no government or Budget commitment has been announced. The FCA decided on 3 February 2026 that a price cap or ban isn't warranted.
Is It Cheaper To Pay For Car Insurance Upfront?
It can be. Many monthly plans charge interest, shown as an APR. Average APRs among firms in the FCA's sample were 19.2% in 2026, though some providers offer 0% APR. Compare both totals before you buy.
Is The FCA Doing Anything About Monthly Charges?
Yes, but not a cap. The FCA says it's monitoring prices and fair value and says it's ready to act if firms fall short. Under the Consumer Duty, firms must show the price is reasonable for the benefits.
