A car insurance quote can look wonderfully manageable when the monthly figure is placed front and centre.

£62 a month may feel easier to budget for than £744 in one payment. And if the payment option is labelled “interest-free”, it is natural to assume you are paying exactly the same amount – just spread across the year.

But the small print may tell a different story.

New research published by Defaqto on 16 September 2026 found that many online motor insurance journeys still do not clearly explain the practical cost of policy excesses or the true cost of paying monthly. Its review of 25 quote-and-buy journeys found scores ranging from 39.5 to 79.8 out of 100 for how well customers were helped to make informed decisions.

So, before you focus on the lowest monthly figure, it is worth checking two things carefully:

  • How much will the policy cost altogether?
  • How much could you have to pay yourself if you claim?

What is an excess?

An excess is the amount you agree to pay towards a claim. The insurer usually pays the remaining eligible cost, subject to the policy terms and limits.

For example, imagine your car needs £2,000 of covered repairs and your total excess is £500. You would normally pay the first £500, with the insurer considering the remaining £1,500.

There are usually two parts.

Compulsory excess

This is set by the insurer. You cannot normally remove it, although the amount may vary depending on factors such as your age, driving history, vehicle and claims record.

Voluntary excess

This is an amount you choose to add. Selecting a higher voluntary excess can reduce the quoted premium because you are agreeing to take on more of the cost if something goes wrong.

That can be useful if you have enough savings to cover it. But it can also be a false economy.

A policy that saves you £80 a year but adds £300 to your possible claim cost may not be the bargain it first appears to be. Especially if the saving is made by selecting an excess you would struggle to pay.

Calculator, policy paperwork and car keys arranged on a bright kitchen table

The excess trap

When you compare policies, the headline premium is usually easy to spot. The excess may be less prominent.

This matters because a high excess can affect whether making a claim is worthwhile at all.

Suppose your compulsory excess is £250 and you choose a voluntary excess of £500. Your total excess may be £750, depending on the policy wording.

If you have a minor accident causing £600 of damage, you may receive nothing because the repair cost is below the excess. If the damage costs £2,000, you could still need to find £750 before the policy contributes.

And if you have two separate incidents during the policy year, the excess may apply to each claim. It is not necessarily a single annual contribution.

Before choosing a higher voluntary excess, ask yourself:

  • Could I pay the full amount tomorrow?
  • Would I still have enough money for repairs, transport or other bills?
  • Is the saving on the premium large enough to justify the extra risk?
  • Does the excess apply differently to theft, accidental damage, fire or windscreen claims?

There is no universally correct excess. The right choice is the one that fits both your budget today and your ability to deal with a claim later.

What does “interest-free” really mean?

Monthly car insurance payments can work in different ways.

Some arrangements genuinely spread the annual premium without adding interest. Others involve a credit agreement, administration charge or premium finance arrangement. In those cases, the total paid over the year may be higher than the annual price.

The phrase “interest-free” does not always answer every question. You should still check:

  • The cash price for paying annually
  • The total amount payable if you pay monthly
  • Whether there is an arrangement or administration fee
  • The APR, if credit is involved
  • The number and size of the instalments
  • Whether the first payment is different from the rest
  • What happens if you cancel before the year ends

The important figure is not simply the monthly payment. It is the total amount leaving your bank account over the full policy term.

A worked example

Here is a simple illustration. These figures are examples only, rather than a quote.

Payment option Amount
Annual payment £720
Monthly payment £66 for 12 months
Total paid monthly £792
Difference £72

At first glance, £66 a month may look more comfortable than £720 upfront. But over 12 months, the monthly option costs £72 more – a 10% increase compared with the annual payment.

That extra cost may be worthwhile if spreading payments helps you manage your household budget. The point is not that monthly payments are always wrong. It is that you should know what convenience costs before accepting it.

Now add the excess.

Imagine the policy has:

  • A compulsory excess of £250
  • A voluntary excess of £400
  • A total excess of £650
  • A repair bill of £2,000

You would be expected to contribute £650, leaving £1,350 for the insurer to consider, subject to the policy terms.

The monthly payment and the excess are separate costs, but they can arrive at the same financially inconvenient time. If you are already paying more for the policy each month, make sure you also have enough set aside for the excess.

Check the smaller claims

Not every part of a motor policy uses the same excess.

Windscreen claims may have a separate excess, and the amount can depend on whether the repair is possible or the windscreen needs replacing. There may also be conditions about using an approved repairer.

A courtesy car is another area worth checking. It may not be automatically included, and where it is included, the terms may specify:

  • The type or size of replacement vehicle
  • How long it will be provided
  • Whether it is available after every type of claim
  • Whether your car must be repairable
  • Whether it applies following theft
  • Any age, licence or driving restrictions

A courtesy car that is only available while your vehicle is being repaired may not help if the car is declared a total loss. It is better to know that before you are standing beside a damaged vehicle wondering whether your policy includes a replacement.

What Defaqto’s research means for drivers

Defaqto’s findings do not suggest that every insurer handles monthly payments or excesses in the same way. In fact, the research found wide variation between online buying journeys.

The practical message is simpler: information being available somewhere in a policy document is not always the same as information being clear at the moment you make a decision.

This is particularly important when you are tired of comparing quotes. After entering registration details, occupation, mileage and security information, it can be tempting to select the cheapest-looking option and move on.

But a few extra minutes checking the details could reveal that the cheapest monthly figure comes with:

  • A larger total annual cost
  • A higher excess
  • Limited windscreen cover
  • Restricted courtesy-car cover
  • Cancellation charges or limited refunds
  • Optional extras already added to the quote

T&R Direct offers UK motor insurance from an extensive panel of leading UK insurers. You can learn more about motor insurance and compare the cover available for your circumstances.

Your buying checklist

Before buying or renewing car insurance, make sure you can answer these questions.

Payment

  • What is the annual price if I pay in one go?
  • What is the total amount payable monthly?
  • Is the monthly arrangement a credit agreement?
  • Is there an APR, fee or other charge?
  • Are the instalments equal?

Excess

  • What is the compulsory excess?
  • What voluntary excess have I selected?
  • What is the total excess?
  • Does the excess apply to each claim?
  • Are different excesses used for theft, fire, accidental damage or windscreen claims?

Cover

  • Is windscreen repair and replacement included?
  • What excess applies to a windscreen claim?
  • Is a courtesy car included?
  • How long would I receive it?
  • Does it apply after theft as well as an accident?
  • Are there restrictions on the replacement vehicle?

Cancellation

  • What happens if I cancel during the policy year?
  • Would I receive a refund?
  • Could cancellation charges or outstanding finance apply?
  • What happens if an instalment is missed?

If any answer is unclear, ask before buying. You can also use T&R Direct’s advice on checking the small print as a useful reminder to look beyond the headline price.

The sensible way to compare

Start with the total annual cost. Then check the excess. After that, look at the cover that matters most to you.

Paying annually may cost less overall, but monthly payments can make insurance easier to budget for. A higher excess may reduce the premium, but only choose one you could realistically afford after an accident.

And remember that a cheap policy is not necessarily poor cover, just as a more expensive policy is not automatically better. It is about finding the balance between price, protection and what you could manage if you needed to claim.

For more general guidance on weighing up price and cover, see T&R Direct’s advice on finding the right price.

The best quote is not always the one with the smallest number on the screen. It is the one where you understand the total cost, know your excess and can use the cover when you need it – without an unpleasant financial surprise waiting in the small print.

Research referenced: Defaqto research reported by Insurance Business UK, published 16 September 2026.