06 Nov 2017 The soaring cost of running a car appears to be leading more drivers to become car borrowers and sharers, rather than car owners, according to pay-as-you-go insurer Cuvva.
In the last year, the average UK insurance premium has risen by 14.6% – five times faster than inflation – while car prices rose significantly earlier this year as a result of currency devaluation associated with Brexit, and petrol prices also reached a four-month high in September. The combination of these factors is likely to be leading to a reduced demand for new cars. Indeed, the number of new car registrations has fallen for seven consecutive months, with the latest figures showing a 12.2% slump in sales in October.
These spiralling costs also appear to be influencing people’s driving habits, with a rise in those borrowing and sharing vehicles, rather than owning them outright. This is evident in the sheer growth of carpooling networks and platforms, and in the fact that over the last six months, the number of people taking out short-term insurance with Cuvva has risen by 177%.
This type of ‘pay-as-you-go’ insurance is predominantly used by people borrowing a friend or family member’s car for a short period of time – meaning they only need insurance for a matter of hours. For a driver who needs to borrow someone else’s car for a total of four hours a month, for example, the annual cost of pay-as-you-go insurance with Cuvva’s short-term hourly product, on average, would come to £532.80. This is just 25% of the cost incurred by an average UK driver running their own car for a year.
Freddy Macnamara, CEO and founder of Cuvva, said: “With inflation now at a five-year high and wage growth slow, a lot of people are having to work hard to keep within budgets. One of the biggest expenses for a lot of consumers is the cost of running a car, which is one of the reasons why new car sales have fallen for the last six months.
“These soaring costs are also leading to an attitude change when it comes to car ownership. A lot of people, especially those who drive infrequently, are choosing to share cars between friends and family members, so that they only have a car for the time they need it.
“The car insurance market is responding to this trend by offering more flexibility to drivers. With Cuvva it’s now easier than ever to borrow someone’s car for a short period of time and quickly get insurance on a pay-as-you-go basis, and this will only encourage the trend of car sharing.”
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