Car payments and COVID-19: insurance, tax and finance guide09 May 2020
The effects of COVID-19 are stretching far beyond health, into almost every aspect of life, be it personal, political or indeed financial.
Motoring is bearing a large brunt of the impact, with the government advising against all non-essential travel unless you’re a key worker.
Here, the Leasing Options team list the key points on insurance, tax and finance, and how to manage your car-related finances.
Can I claim a refund on my insurance premium?
Since the UK lockdown began, there’s been a substantial drop in traffic levels. With that, comes a drop in accidents and subsequent insurance claims.
Admiral car insurance customers are getting a £25 refund on their premiums, from a £110m fund that they’d usually have put towards claims and repairs, but this isn’t something that’s being offered by all insurers unfortunately.
If you’re using your car much less and want to save costs during the lockdown, you could make a Statutory Off Road Notification (SORN), but there are implications to be aware of.
Should I SORN my car?
Making a SORN legally declares your car off the road, allowing you to claim back on any full months of remaining tax and also cease your insurance.
However, doing so would mean you aren’t covered in the event of an accident or theft. Declaring your car SORN also means it has to be kept on private land — this includes your garage or driveway, but not a public road.
These points are worth considering if you’re looking at cost-cutting.
Am I able to save on road tax during the lockdown?
Other than getting a SORN for your car, there aren’t any clear-cut ways of saving on road tax.
And if you expect to be driving even just one day a month through the lockdown, you’ll still need to be taxed. Failure to do so could land you with a fine of up to £1,000.
Zero-emission cars are exempt from road tax and, as of April 2020, are also free of the tax supplement for vehicles costing more than £40,000. If you want to save on costs, however, buying a new car is probably one to avoid.
How can I help my finances through lockdown?
A broad question, but one with quite a few solutions. Tax and insurance aside, there are many other ways to aid your finances and ease the burden through the lockdown.
The Financial Conduct Authority (FCA), in particular, are fighting that corner and have already helped to implement some helpful changes.
The regulator has encouraged motor finance companies to offer a three-month payment freeze to customers facing financial difficulty and also proposed that customer contracts are not unfairly changed.
In the case of Personal Contract Purchase (PCP) agreements, it’s advised firms to refrain from using temporary depreciation on car prices. This could protect end-of-agreement prices and, in turn, part-exchange and equity values.
Simple methods of cost-cutting
Although you may not be able to get out of committed expenditure, such as insurance and tax, there are other, simpler methods of managing your money.
With reduced time behind the wheel, for example, you may save on hefty fuel bills. Going by the UK averages on commuting distance, fuel efficiency and current fuel prices, you could be saving nearly £60 a month on fuel costs.
That being said, those averages include a 30-mile daily commute and 50mpg fuel efficiency. Many drivers will commute a much greater distance in less efficient vehicles; the real savings for you could be much higher.
Saving in other areas
Saving money elsewhere will also help with affording your car. It may seem that you’re spending more on the weekly shop right now, but consider that there are no meals out or trips to the local.
The money saved there may surprise even the lightest of drinkers!
Keeping track of your outgoings also helps. Each week, make a note of your current bank balance and deduct any commitments and monthly payments from the value.
The amount you’re left with is your disposable income, and having this number written down will make it much easier to keep an eye on where your money is going and how much you have to play with.
Seek help when you need it
There is no shame in financial difficulty, and you should get help whenever it’s needed.
If you’re struggling with car payments, it’s best to speak to your finance company or insurer as soon as possible; ignoring the problem and defaulting on payments could land you in a worse situation.
Keep up with the government’s latest guidance at www.gov.uk/coronavirus.
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