OPINION: How 'under the cosh' motorists can save cash
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The ready availability of easy credit and ultra-low interest rates meant the phrase ‘belt-tightening’ gradually fell out of common usage for a number of years, though it has recently returned with a vengeance.
The expression is believed to have originated in the USA during the Depression of the late 1920s but quickly navigated its way over to this side of the pond. Its usage has recently become more commonplace as the spectre of rising inflation looms larger than it has done for decades, creating a boom in websites offering advice on how to make savings, however small.
Among the most influential reasons for soaring prices are the pandemic – which caused unprecedented shortages of goods, stretching supply chains to the limit – and Russia’s invasion of Ukraine, which has exacerbated the problem.
Economists argue over whether inflation will quickly pass by or become an onerous feature of everyday life. Frankly, no one knows, although the signs indicate that inflation’s corrosive impact will be with us for a while – a miserable outlook that adds considerable appeal to those online saving tips.
For the majority of households, the soaring costs of most concern are utility expenses, with real problems expected when heavy bills start arriving in late autumn.
There are myriad ways of reducing gas and electricity expenses, although there’s no ‘golden bullet’ capable of wiping hundreds of pounds from a bill. Instead, switching off appliances and lights when they’re not in use, insulating the home and checking your bill carefully are some of the ways in which costs can be reduced.
Meanwhile, the UK’s 34 million motorists are having to come to terms with significant variations in annual car insurance expenses.
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According to the Association of British Insurers (ABI), the cost of an average comprehensive car insurance policy has remained reasonably stable at around £485 over the past five years. This year, however, East Anglia motorists, particularly those aged 50 and above, can expect to see bills closer to £650 when the time arrives to renew their policies.
The situation is made worse by the imposition of Insurance Premium Tax (IPT), first introduced in 1993. This tax has, like almost every other state levy, risen virtually unnoticed over the past quarter-century, although its impact has grown more significant as basic insurance costs have risen.
For example, back in 1993, annual car insurance cost around £200 on which an IPT of £5 (2.5pc) was levied. Today, with basic car insurance costs nearer £500, the IPT levy of 12pc equates to £60. In other words, motorists are contending with a 12-fold increase in a tax which, as it has been hiked on six separate occasions, is very likely to get higher.
“Motorists are under the cosh,” says Ken Carter, head of insurance services at personal finance website Moneymapp.com. “And it’s not just older drivers who are bearing the brunt of a steep rise in vehicle-related expenses.
“Those aged 25 and under have witnessed an average increase of £163 in their insurance premiums over the past 12 months, bringing the younger person’s annual car insurance to an eye-watering £1,225.
“On top of this, used car prices are soaring, while a shortage of skilled labour has pushed up vehicle repair costs. Once rapidly-rising fuel costs are factored into the equation, it makes great sense for motorists to shop around for cheaper annual car insurance when their old policy is due for renewal.”
One of the easiest ways drivers can cut their motoring expenses is to lower their annual insurance costs. According to Mr Carter, savings of up to £290 can be achieved when the time comes to renew policies.
“Inertia accounts for millions of people losing money by ‘auto-renewing’ their annual insurance cover,” says Mr Carter. “Yet it’s surprisingly easy to rectify this by shopping around and comparing insurance costs. For example, we feature more than 100 major insurers on the Moneymapp website and, as a consequence, motorists can achieve significant savings on their annual outgoings.”
As ‘belt-tightening’ re-joins the lexicon, the phrase’s practical application is likely to see millions of motorists shopping around to save themselves hundreds of pounds.
For more financial advice, check out Peter Sharkey’s regular blog, The Week In Numbers.