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A cold snap in car insurance

As rising costs buffet Britain's motorists, Melanie Bien shows how to drive a better deal on cover

The cost of motoring is soaring - a situation compounded by uninsured dri-vers, who are pushing up premiums for everyone else by an extra £30 a year on average.

The cost of motoring is soaring - a situation compounded by uninsured dri-vers, who are pushing up premiums for everyone else by an extra £30 a year on average.

An estimated one in 20 drivers are uninsured - some 1.25 million people - and the cost of road accidents they cause amounts to around £500m each year. With insur- ers having to meet the cost from somewhere, the innocent motorist is paying the price.

Add in the rises in fuel costs, road tax, general running expenses and the introduction of congestion charging, and owning a car can prove a big drain on resources. Yet it is possible to cut costs by shopping around for insurance and breakdown cover.

First, if you are buying a new car with cash, you have great bargaining power. Haggle with the dealer over the price: at the least, you should get some extras thrown in for nothing or a year's free insurance or breakdown cover.

If you need to borrow money to pay for a new car, the financing package offered by your local showroom is unlikely to be the most competitive. You can almost certainly save money by taking out a cheap personal loan.

For example, if you are buying a new Peugeot 206 five- door SW XSi for £13,470 on the road with a £1,000 deposit, your local dealer will charge you an annual percentage rate (APR) of 13.64. This works out at £329.04 a month or £16,977.12 over four years.

However, a search on website moneyextra.com, which compares the price of financial products, reveals a loan from Cahoot with an APR of 5.9. This works out at £291.41 a month or £13,987.68 in total.

Many people try to make savings by driving without insurance; but they risk a statutory fine of £200 plus six points on their licence if caught. And although car cover is expensive - particularly if you opt for a comprehensive policy rather than just third party, which covers you for damage and injuries to other people and their property - you can drive premiums lower by using a broker to scour the market.

For example, a 45-year-old male and his 36-year-old wife, both with a seven-year no- claims bonus, living in Lingfield, Surrey, and keeping an Audi A4 on the drive, could pay £1,180.96 for the most expensive comprehensive cover offered by the AA's panel of 23 insurers. But if they opted for the cheapest, they would pay just £592.30.

Another way of cutting costs is to persuade your kids to take out their own insurance. "If you put a youngster on your own policy, it knocks the premiums through the roof," says a spokesman for the AA. "It is much better that they take out their own policy and start building up their own no-claims bonus."

Once you have found the most competitive cover, stay on the alert. When you receive your annual renewal, check if you still have the best deal - or whether there is a better one out there.

Breakdown cover is yet another cost, but as the cold snap proves, it can be well worth the money. Prices have also plummeted as traditional providers such as the AA and RAC have been joined by a number of young pretenders.

For example, a 30-year-old woman taking out breakdown cover on her new car, in which she travels 10,000 miles a year, could expect to pay £146 per year for AA cover. But if she looked on financial website moneysupermarket.com, she could pay just £34.80 to Europ Assistance.

The AA may argue its policy is more comprehensive, insuring the driver even if she is using someone else's car. But the Europ deal will cover you for most situations, such as roadside repairs, recovery to the nearest garage, home start, car hire and accommodation.