Spreading payments can add over a third of the total cost of the policy, MoneyExpert stated and only 14 per cent of insurers allow policy holders to pay by direct debit at no extra charge.
Sean Gardner, chief executive of MoneyExpert.com, said: “Motor insurance is expensive and opting to pay by direct debit is a popular way to spread the cost. However, this comes at a cost – insurers argue they are making a loan to customers if they let them pay in this way.
“The consequence is that any hard work you may have put in to shopping around for a cheap deal could be in vain as savings are wiped out by the extra cost.”
Some firms charge as much as 21 per cent APR, something that Mr Gardner says could be a “nasty surprise” and adding to the debt burden motorists suffer.
He suggested that drivers shop around for policies to ensure that they do not get into excessive debt by driving.
Other proposed solutions include paying off the policy in one lump sum by taking advantage of a nought per cent interest deal to add the insurance to credit card debt.