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With car insurance prices at record heights it is hardly surprising that so many people are looking for cheap deposit car insurance policies and the insurance industry has responded to that demand by making available a large number of offers for those who prefer to put a small deposit down and pay the balance monthly, rather than pay for their car insurance in advance with one payment.

There is, however, two problems for the insurance companies to consider, when they make these offers. Firstly, insurers have traditionally made much of their profit by investing money which people have paid them in advance for policies, which cover them for events which, if they happen at all, may well happen many months or even years down the line. This means that they have considerable funds to invest, whether in stocks and shares, property or anything else they feel they can make money on. There is another problem as well; when people pay in advance they are guaranteed 100% of their money, but when they are paid monthly there will always be a proportion of clients who will fail to complete their payments and will either cancel the policy or simply stop paying before it was contracted to end.

So, many of them have taken the attitude that since they are in effect lending money to their clients in order that they can buy their policies, it is fair and reasonable to charge interest. The only problem is that some of them charge far too much.

To balance against that, there are very often special offers made by insurance companies because, let's face it, they work in a highly competitive industry and gaining new clients is not easy. As a result, there are often very good deals to be made by customers who are prepared to shop around.

The problem of course is that all this can take a great deal of time which is where the Tesco comparison engine comes in. They will compare quotations for you from a large panel of insurers and give you not only the basic price, calculated on payment in full in advance, but also the monthly repayments. Perhaps not surprisingly, very often the cheapest policy initially can work out more expensive when bought monthly, because of high interest charges. Sometimes these charges are so heavy that it could be cheaper to pay in advance using a credit card, and then only pay the minimum off each month. On the other hand, it can also be possible to get a far lower interest rate (and sometimes completely free credit) from insurers who offer a better policy with more benefits, making the total cost of that superior policy actually lower than the other.

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