Car dealers have been accused of ripping off customers by charging hugely inflated prices for insurance add-ons.
Consumer group Which? has found that dealers are making substantial commissions on products which can be secured far cheaper elsewhere, with some charging up to £367 more than the cost of going direct to the insurer.
The biggest differences were found with GAP (Guaranteed Asset Protection) insurance, which covers any difference between a car’s value and the outstanding finance should it be stolen or written off.
Even the closest dealership offering was twice the price of dealing with the insurer direct, with the worst offenders charging 278 per cent more.
Which? looked at the cost of buying GAP insurance from four car dealerships, and compared the costs to buying the same cover from an insurer directly.
It found that the cost of GAP insurance for a Ford Fiesta from a dealership was £499, but only £132 on average when purchased directly from an insurer.
Even the smallest disparity for GAP insurance was 102 per cent – for a Honda CR-V that cost £415 from a dealership, but just £205 on average from an insurer directly.
Which? also found that cosmetic and dent insurance was almost 60 per cent cheaper to buy from an insurer directly than from a car dealership, and alloy wheel and tyre insurance was up to 26 per cent cheaper bought from an insurer than from a dealership.
Jenny Ross, Editor of Which? Money, said: “We’re really concerned that car dealers are continuing to pocket huge commission fees from selling insurance products at rip-off prices, despite recent scrutiny from the financial regulator.
“The FCA needs to keep a close eye on these practices and be ready to step in with strong action if consumers face mis-selling or unreasonable charges for these products.”
The Financial Conduct Authority (FCA) launched an investigation into GAP policies earlier this year after it found numerous examples of dealerships receiving high and potentially excessive levels of commission. It also found dealers selling products to ineligible customers who did not need the cover.
Since publishing its findings, the FCA has warned insurers not to allow dealerships to receive commission “which bears no reasonable relationship to the costs or workload to distribute the product”.