One in three describe their car insurance premiums as ‘unaffordable’
24 June 2024New research reveals that 30% of car owners describe their car insurance premiums as ‘somewhat unaffordable’ or ‘very unaffordable’. This proportion is greater for younger age groups and those on lower incomes: premiums were viewed as unaffordable by 39% of under 30s and 42% of those in the bottom income quintile. However, even in the highest income quintile, one in five (21%) describe their premiums as ‘unaffordable’.
Being able to afford transport is particularly important for jobseekers. Among all non-retired households actively seeking a new job, a quarter (24%) said that transport issues (e.g. lack of a car or unsuitable public transport) were a barrier to their job search, rising to four-in-ten (42%) of job-seeking households without a car. A third (35%) of job-seeking respondents with multiple disabilities said that transport issues were a barrier to finding a new job.
The Financial Fairness Tracker, commissioned by the Financial Fairness Trust and carried out by a team of researchers at the University of Bristol, has been monitoring household finances since the start of the pandemic. Researchers questioned around 5,600 households about their financial situation as well as specific questions on areas like transport and housing.
Among those who had taken out or were repaying motor finance in the past six months (equivalent to 11% of car-owners or 9% of all households), there were slightly higher levels of serious financial difficulty (14% vs 12% of car owners overall) and considerably higher rates of households ‘struggling’ financially (32% vs 23%). The recent increase in premiums will only exacerbate the situation for struggling households.
Researchers also found an ethnicity gap concerning car insurance affordability. Amongst those from minority ethnic groups, 36% found car insurance unaffordable, for White British groups this figure was 29%.
Due to concerns around cost, 18% of all households have reported reducing their car use (or use of other forms of transportation) in the past six months (rising to 20% of car owners and falling to 8% of non-car owners). Broken down by income, 29% of car owners in the lowest income quintile had reduced their use of the car (compared to 11% of car owners in the highest income quintile).
Mubin Haq, CEO of abrdn Financial Fairness Trust, said:
“For many people a car is not a cost they can cut back on. Inflation has now hit the Bank of England’s target for the first time in three years. That’s good news but the cumulative impact of rising costs is still being felt by millions. Importantly, this is disproportionately impacting lower income households who are twice as likely to find car insurance premiums unaffordable. It is very likely there will be long-term scarring effects on the spending patterns of low-income families.”
Professor Sharon Collard, Chair in Personal Finance at the University of Bristol, said:
“Many households have been shocked by the recent rises in their car insurance premiums. For those who rely on their cars to get to work, a car is essential and insurance is not a corner that can be cut. For those who are living on a tight budget these increases will be hard to absorb.”
Being able to afford transport is particularly important for jobseekers. Among all non-retired households actively seeking a new job, a quarter (24%) said that transport issues (e.g. lack of a car or unsuitable public transport) were a barrier to their job search, rising to four-in-ten (42%) of job-seeking households without a car. A third (35%) of job-seeking respondents with multiple disabilities said that transport issues were a barrier to finding a new job.
The Financial Fairness Tracker, commissioned by the Financial Fairness Trust and carried out by a team of researchers at the University of Bristol, has been monitoring household finances since the start of the pandemic. Researchers questioned around 5,600 households about their financial situation as well as specific questions on areas like transport and housing.
Among those who had taken out or were repaying motor finance in the past six months (equivalent to 11% of car-owners or 9% of all households), there were slightly higher levels of serious financial difficulty (14% vs 12% of car owners overall) and considerably higher rates of households ‘struggling’ financially (32% vs 23%). The recent increase in premiums will only exacerbate the situation for struggling households.
Researchers also found an ethnicity gap concerning car insurance affordability. Amongst those from minority ethnic groups, 36% found car insurance unaffordable, for White British groups this figure was 29%.
Due to concerns around cost, 18% of all households have reported reducing their car use (or use of other forms of transportation) in the past six months (rising to 20% of car owners and falling to 8% of non-car owners). Broken down by income, 29% of car owners in the lowest income quintile had reduced their use of the car (compared to 11% of car owners in the highest income quintile).
Mubin Haq, CEO of abrdn Financial Fairness Trust, said:
“For many people a car is not a cost they can cut back on. Inflation has now hit the Bank of England’s target for the first time in three years. That’s good news but the cumulative impact of rising costs is still being felt by millions. Importantly, this is disproportionately impacting lower income households who are twice as likely to find car insurance premiums unaffordable. It is very likely there will be long-term scarring effects on the spending patterns of low-income families.”
Professor Sharon Collard, Chair in Personal Finance at the University of Bristol, said:
“Many households have been shocked by the recent rises in their car insurance premiums. For those who rely on their cars to get to work, a car is essential and insurance is not a corner that can be cut. For those who are living on a tight budget these increases will be hard to absorb.”