Beware monthly repayments, they're really a loan!

Ah, is it time to renew you insurance? Are you buying a new mobile phone, washing machine, TV, vehicle or any other expensive item? or perhaps you are repaying a credit card purchase? The financial experts behind these services are really helpful - they do not want you to go through any hardships with your daily dose of visual entertainment on the TV. They'll even throw in free next day delivery in most cases.

Why settle for a 40" dumb TV with a plain old HD LED screen, when you can have 58" 4K TV with built in free view, smart remote, wifi capabilities, media streaming with a propriety interface and badly designed remote (that takes forever to type anything into the badly coded web browser) and mediocre version of BBC iPlayer / YouTube apps built in - that will update for 6 months and then stop. Surely the latter is the better option?

It really isn't better at all in my opinion - a TV built with all of those features, still feels underrated compared to a TV attached to a small energy efficient PC. It has the streaming, WiFi, free view, decent keyboard, latest software updates, Google Chrome, YouTube and pretty much every feature a PC has, on a giant TV screen! Plus a small Bluetooth or wife remote with a reduced sized keyboard is plenty good for that setup.) Unfortunately, despite my proposed solution being better than the latest in Smart TV technology, both still provide access to mind numbingly stupid TV content - which we are all more than happy to consume. There appears to be no known cure to this willingness to succumb to 'reality' TV shows and other stupid content, so far - bar the removal of the TV or very strong will power, and only watching a documentaries or insightful content every now and again; The latter has served me well.

In any case, I will rant about TV content and modern media another time, in the meantime I want to make those sales sharks people the core of our discussion. In particular their suggestion of repayment over the long term. It sounds like a very helpful proposition, "the buyer cannot afford, £1000, so we let them pay this amount over 48 months". Here is the sting in the tail: "with interest".

See the image below, for car insurance

See the 3rd column? With installments? You are paying back the loan with interest and the total repayment is xxx amount - more than the figure shown in big lettering. This applies to almost any sort of repayment strategy. Buying a £1000 TV with monthly repayments, is effectively a loan for £1000 - at a very high interest rate, which you pay back. 

The same applies for a mobile contract, if you look at a SIM only deal, you can see talk time is cheap (600 minutes a month, is 10 hours of talking!), so why pay £20 to £40 a month? In reality you are paying for the handset, which when you total the length of the contract, will easily end up in the £1000's - just for owning a bit of metal/glass and plastic - which I assure you, before your contract comes to an end, is going to be a burden on you (slow, laggy, buggy, scratched/damaged) - and you will be itching for the next new phone. You could buy even the most high end handset for half of that price, and put a monthly SIM card in there, for £10 or less.
Monthly repayments really are a loan, I do not need any further examples.


So what is the solution to this predicament?

1. Do not buy crap, you will find your life is pretty complete with a smaller, less featured model of this item. (obviously car insurance or home insurance leaves us little choice). Even if you can afford crap, carefully evaluate this crap and then decide if you really need it.
2. Do not buy crap you cannot afford. Save up and then buy it outright - you might get lucky and see a price reduction/sale over the next few months and also not have to pay the interest - savings galore!
3. Talk to a human being on the phone and arrange an interest free payment option spread out over 2 or 3 months. That should reduce the sting of having to fork out £2000 or whatever in one go, and instead spread it out over 3 months with 0% interest. Not everything is automated, and speaking politely and explaining your circumstances in some cases, may help. I have done this with my car insurance for a few years now, and off course payment was made with a cashback credit card, thereby collecting a nice tidy bit of cash at the end of the year.
4. Borrow cheaply elsewhere. If it is absolutely necessary that you pay for this large expense, get a loan, overdraft, or a credit card with a lower APR than the sales person proposes. Work it out on paper and shop for cheaper lending options.


Research is key. 

In the above insurance example image, the RAC insurance is £2632 paid outright (its a lot of money to pay in one go), and it works out to be £2895 paid monthly, after all installments have been made, a difference of £263 over 12 months. That is almost £22 in interest per month. 

• Can you borrow £2600 elsewhere at a cheaper rate? (i.e. on a 0% credit card or a trustworthy friend/family member, overdraft on your bank account (my bank charges me £12 for overdrafts per month - which is cheaper than the £22 interest I would be paying)).

• Can you dip into your savings? Surely your £2600 savings are not earning you more than £22 a month? in which case it makes sense to let them earn. Otherwise use your savings to pay this cost, as it will save you £263 worth of outgoings at the end of the year - left in savings it will generate far lower. (Hint: you have to earn 10% interest to get £260 returns on £2600 - which is near impossible for average people like you and I).

I honestly believe, we sometimes pay ridiculous amounts for things we could do without, just for the sake of having something new or shiny, be it a TV or a sofa or a new phone. The novelty wears off within a few days, but the (hidden) interest payments continue for a long, long time...

Car Insurance Scam: Scammed By The Insurers 3

This is a continuation of my previous post.

I went on to their Facebook page and decided to write about my experience as a way of letting others know about it, and thus help them if they were planning on getting insurance with GoSkippy. However a short while later I received a private message on Facebook asking for the policy number and further details. I did as asked for, and I was told that they said they would consider giving me an extension to provide the required documentation.

No thanks! No other insurance company needs scanned driving licenses and counterparts, and they also know how to use email. Furthermore, this hidden cancellation fee was outrageous, I just wanted to end the policy and move on. I conveyed this to the person messaging me and he said he would raise the issue with the complaints department.

So come Monday morning, I received another email, from the complaints department, who said that the £75 fee was final, and I was expected to pay for the 6 weeks of coverage (another £49), unless I could resend the documentation within 3 weeks - so that they could keep me as a customer. They assumed that I was grumbling about them not receiving the relevant documentation, however what they didn't realise, was that I was tired of their business practice, my real concern was the excessive fee and no matter what they did, I was leaving them. That really wasn't on, I was being charged a fee that I was not made aware initially. I was not fully convinced that cancelling a financial contract required £75 worth of man hours.

Clutching at straws, I fired off an email, mumbling about their hidden fee and I would be in touch with Southern Rock (the underwriter) and other financial regulatory agencies (in the UK, this means the 'financial ombudsman'). A day later I was presented with another email, but this was in a different tone.


"Firstly we aim to provide excellent customer service at all times, and I am sorry that you do not feel
 we have done so in this instance. , I am concerned to hear of the issues and challenges that you have faced with your Go Skippy insurance policy. I would like to reassure you that this is not the experience I wish a valued customer to receive.
...
However I do note that you have expressed your dissatisfaction providing this information and therefore, as a gesture of goodwill, upon cancellation of your policy, I will waive the cancellation fee of £75.00. 
...
Finally, and once again, please accept my sincere apologies for any inconvenience this matter may have caused you."

Now, this I liked. I'm not quite sure what happened, but I assume the mention of "financial regulatory agencies" may have moved a few cogs somewhere.

A small fee waived, but a large victory, over a large, greedy, over-zealous insurance company.

I managed to set up insurance with Churchill again, but as a new customer, my father was only charged £470, which was reasonable, and a lot less than their previous renewal price. So another small victory.

Beware: insurance companies registered abroad

Having read some comments on forums, it appears that GoSkippy have consistently poor customer experience, and use Southern Rock as their insurer, who are actually registered in Gibralter and not in the UK. Not sure how easy it is to deal with them, but I am glad I never had to find out.

Car Insurance Scam: Scammed By The Insurers 2

This is a continuation of my previous post.

After the phone call, I read all of the emails and letters they had sent me (luckily I do keep these important letters organised in a metal filing box). Now this left me confused, I could not find any letter or email that specified this £75 fee. In particular, their initial email stated:

"It is also important that you read the full Policy Booklet, Your Statement of Information, Your Motor Policy Schedule and Your Certificate of Motor Insurance, which together, form the basis of the insurance cover you have purchased to ensure that it meets your demands and needs and you are familiar with all aspects of cover given to you and in what circumstances this may be excluded or limited. Policy Key Facts and Full Policy Wordings can be viewed or downloaded by clicking on 'Policy Wordings' from the GoSkippy website"

So, I read the "policy booklet", "statement of information", "motor policy schedule", "certificate of motor insurance" and finally on their website their "Policy Wordings" (they have several PDF files, I read the Southern Rock one, as that was the underwriter for this policy). This is what it said about cancellation:

"Where We do not receive evidence of Your no claim discount, licences for all drivers named on Your Policy or any other valid requests to support the accuracy of information You gave Us and on which Your insurance Terms are based upon, within 21 days from the start date of the Policy. If We have not received such evidence by the end of the 21 day period, We may issue a cancellation letter and We will cancel Your Policy if We do not receive evidence by the end of the seven day cancellation notice period"

So I promptly called back, and asked where this £75 fee was stated. The same woman proceeded to open her web browser and asked me to follow her instructions so I could see what part of the website it was shown in. At the bottom of the homepage, there was a link for their "Terms of Business". The woman was adamant, that was standard fee, and that I agreed to their terms of business when I took the policy out. I could see that this conversation was not going to progress any further and she was not going to back down or offer any reduction to this stupidly high fee, and thus I ended the call politely.

Find out how I recouped a small win, in the next post.

Car Insurance Scam: Scammed By The Insurers

Better safe, than sorry

Car insurance, the bane of motorists lives, the world over (or at least in the UK). We hate it, but we need it. And given the abundance of insurance companies (at least several hundred by my reckoning, having compared most of them on comparison sites), we would have thought that with rife competition, prices would be low and added extras would be plentiful. Alas, the insurance market place is wrought with many hidden pitfalls including poisonous small-print, booby-trapped cancellation fees, and spear-headed administrative fees.

My father is in his 50's and his insurance renewal was due in January. And like he has done every year for the last 11 years, he was going to let the insurance auto-renew and not have to worry about a thing. This year he was quoted £585, to auto renew with Churchill. Unfortunately for him, his meddling son, had other plans. I compared the prices of insurance for him as a new customer, online, with various comparison sites (including GoCompare, Money Supermarket and Confused.com)

My advice, skip insuring with GoSkippy

Voila, £387 was the cheapest, with a company called GoSkippy. I rang the company and asked to pay for the insurance and to ensure the new policy was activated the day after his previous insurance cover ended. A job well done, £200 extra to spend, and a pat on the back for myself.

I should have researched the company beforehand, that was my first mistake. They asked for scanned copies of the no claims bonus (8 years, no less), and a copy of the front and back of his license photocard, and the counterpart.

Having sent these in via email, the company claimed not to have received them, and thus I re sent them. And had the same response. A week later (5 weeks into the insurance policy), we recieved a letter, stating that the insurance was to be cancelled within a week as they have not recieved the relevant documentation and that they would be charging us for the 6 weeks of cover and a £75 administration fee!

So I called them and asked what this administrative fee included. The lovely woman on the phone explained how that is the standard fee and it included costs of cancelling the financial contract with the underwriter. I then asked, why this was not specified when I took out the policy. She said that it was. This was my second mistake, I did not record any of the calls I had made to the company.

Find out what happens in the next post.

First world problems: Clutch

Just a quick note on a recent incident I have had with my car. Driving at 30 miles an hour on a main road, on familiar roads on a journey that I had been planning all morning to visit a friend. Seeing my exit come up, I began my preparations to take the corner, checked my mirrors, indicated left, knowing very well where the road would lead and that very soon I would drive past that gleaming red Porsche that I dream about... anyway I digress.

I put my clutch down to shift into second gear and lo and behold my clutch stuck to the floor and the gearstick refused to budge. This was not like anything I have ever experienced (I have quite a short driving history), in my panic, I slowed the car down to a crawl, went round the corner, and let my momentum pull me to the curb, before stopping the car and putting up the handbrake.

In the ensuing half an hour, I did some very rudimentary checks on the car, under the bonnet and in the cockpit, all to no avail. I then thought back to my insurance renewal a few months back and remember something in the terms and conditions about some RAC cover.

I rang them, (not on the 0800 number on their website, more on this in another post), the very helpful customer services woman, assured me that I had free RAC roadside breakdown cover, and gave me a number to call. Within 45 minutes, a very helpful engineer had come up and inspected the car, gave me a diagnostics and towed my vehicle to a recommended garage*.

So, the moral of the story is that it pays to check your terms and conditions and negotiate with your insurance company!

*I did end up paying £800+ for a manufacturer produced clutch with warranty (there seems to be a lack of aftermarket parts for my brand of vehicle), but that's one of the windfalls that life throws at you, you take the blow, get up and keep fighting. Without having the complimentary breakdown cover, my day could have been a lot worse.