85% Off Car Insurance + £50 Cashback... Really?

Tesco is offering cashback on its car insurance, plus 15% off for new customers. And that's on top of a 70% discount. Surely this insurance is practically free?

I think the last time I wrote about a specific advert was after I alarmed a lady with a teeth manicure, whilst trying to read a poster above her head on a London tube. (Read Credit Cards With Small Print And Big Fees.)

This time I'm looking at the latest ad by Tesco Car Insurance from my office, where I'm unable to commit any faux pas.

It says that new car-insurance customers who have a Clubcard (a Tesco loyalty card) get a £50 cashback cheque within six weeks. This excludes Value Insurance customers; I'll come to them shortly.

You also get 1 Clubcard point for every £2 you spend. So you'll get 150 points for your £300 premium. As each point is usually worth a penny, this equates to £1.50.

The Tesco ad also says that all new car-insurance customers (whether you have a Clubcard or not) get 15% off. This excludes Value Insurance again. It's also subject to a minimum premium. (I can't find anywhere what this minimum premium is, and the Tesco press office has been unable as yet to confirm it. If you find it before I do, please add a comment below.)

The Tesco ad bullets another point: 'Additional discounts of up to 70% for careful drivers and loyal customers'. This discount is of course the no-claims bonus, which is available to anyone who has had five or more years without their insurers paying out. 

So that's an 85% discount in total, potentially, plus that £50 cheque. But is it worth it?

Loyalty never blah blah blahs

Existing customers should ask themselves: how does Tesco fund cheaper prices to new customers? By charging more to existing ones. What's more, most insurers will try to entice new customers with better deals, so those are two good reasons for me to repeat the boring but sound advice to shop around and don't be loyal.

Is it a good deal for new customers?

New customers would do well to think '15% off what? 70% off what?' All these percentages are meaningless, because the starting point varies massively from insurer to insurer.

If one insurer charges you £300, another would certainly charge you £1,200, so adverts quoting reductions in percentages are not in the least useful.

The same goes for the cashback. If your premium is £100 more than the cheapest quote, getting £50 cashback won't be enough.

From my experience, the difference between the cheapest and most expensive quotes on the market is typically five to seven times. You can see this for yourself when you do your own online quote. However, for your best friend and his car, the two insurers might swap round: the one that was expensive becomes the cheapest. And this is regardless of whether one or the other was offering a 'special deal' to new customers.

Ignore cashback and so-called percentage reductions. All that matters is the total cost.

More about Tesco car insurance

Those are my main points, but what Tesco chose to bury on its website rather than promote in its recent ad may also be of more interest to you.

First of all, if you cancel your policy within six months, Tesco has the right to ask you to refund the £50 cashback.

On the plus side, it offers a free complimentary check-up. (But this may be of limited use if you already have to pay for a full MOT or if your car is brand new.) It checks your lights, cooling systems, brake pads and shoes, windscreen wipers, battery, tyres, steering system and the oil. Any following repairs wouldn't be free of course!

It also offers 15% off on a Nationwide Autocentres service or 10% off on a mechanical repair. (This excludes Northern Ireland, is subject to terms and conditions, and to availability. Sheesh!) But if you haven't learned from what I've just been writing about so-called percentages then I can't help you.

The online quote experience and Tesco Value Insurance

I noticed that the online quote on Tesco's website does not make it easy for you to see what the compulsory excess is, or even that there is one! Remember, in addition to any voluntary excess you may select, there could easily be a compulsory one, too. Be wary of that.

I mentioned Tesco Value Insurance earlier. I ran a quick comparison of prices and found that, even taking into account the 15% online reduction for Tesco's normal insurance, its Value Insurance product is still 15% to 20% cheaper.

But is it better value?

The quote summary wouldn't give me many details about what's missing in Value Insurance, but I'll outline what seem to be the big differences. To make this easier, I'll call the two products 'Value Insurance' and 'Normal Insurance':

-- You can select comprehensive insurance only with Value Insurance. With Normal Insurance you can choose between Comprehensive or Third Party, Fire and Theft.

-- You have a higher compulsory excess with Value Insurance. From my tests this was at least £475, whereas Normal Insurance typically has no compulsory excess. (Compulsory excesses depend on your individual circumstances.) Your quote will probably default at £300 as a voluntary excess for Normal Insurance and another £100 voluntary excess for Value Insurance, making it a total of £575.

-- Your no claims bonus is not protected with Value Insurance.. (You can learn about protected bonuses under the section 'No Claims Bonus' in this guide.)

-- With Value Insurance your car-parts guarantee for repairs made by your insurer lasts just one year, although the website doesn't make it easy to learn how long the guarantee lasts with Tesco's Normal Insurance.

-- With Value Insurance you can use the insurer's recommended repairer only, and not choose your own. Usually insurers use repairers of reasonable quality though.

-- You can't choose to get a courtesy car with Value Insurance. With Normal Insurance you can, but bear in mind that you must select to get one after you've got your online quote. It's not included as standard. I don't think this is made clear enough.

That was the first article I've written this year, so let me say Happy New Year!

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