Car scrappage insurance switch costs hit buyers
New car buyers are facing a hike in their insurance costs by trying to switch or alter car insurance policies.
In less than a month of the scheme running some 60,000 drivers have taken advantage of the £2,000 discount when buying a new car and scrapping one over ten years old.
However, the cost of sorting out their insurance is biting into savings.
As well as facing higher premiums when switching to a new car, the cost of cancelling or altering existing car insurance is hitting drivers.
On average the adjustment fees for a car insurance policy is £19.40, according to data from uSwitch.com.
The highest adjustment fees of £25 are charges by the AA, Esure, More Than, and Sheila's Wheels.
The lowest cancellation fee was with Swiftcover at £9.99.
This compares with £55 at More Than, £75 at the AA and £50 at Esure and Sheila's Wheels.
Churchill, Direct Line and Prudential have unlimited cancellation fees.
The average cancellation fees was said to be £41.67.
Ashton Berkhauer, insurance expert at uSwitch, said: "Consumers opting for the car scrappage scheme may soon find the shine taken off their new vehicle when they find themselves hit with disproportionate 'admin' fees when updating their existing car insurance policy for the new vehicle.
"Even those motorists, who find the cover for their new vehicle to be cheaper than the amount they paid to insure their older vehicle, will still be subject to a policy adjustment fee which certainly diminishes any money saved on their premium."
He added car insurance providers should waive fees for adjustment so as not to deter participate in the scrappage scheme.
However, a greater squeeze on drivers taking advantage of the scrappage scheme will be the effect of depreciation.
It is estimated motorists buying the UK's top ten best-selling new cars are set to lose £527 each month due to depreciation in the first year behind the wheel of their brand new motor.
The UK's best-selling car - the Ford Focus Style - loses £8,625 or 51 per cent of its value in the first year, while the Vauxhall Astra loses 67 per cent of its value.
The Ford Fiesta Hatchback depreciates the least, losing 38 per cent of its value in the first year.
The cost of depreciation hits hard in the event of a write-off - as the insurance payout often does not cover the price of a new vehicle, but its value at the time of the accident.
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