The typical cost of car insurance has fallen by £221 annual new data shows.
The 23 per cent drop means an average premium fell to £729 in December 2024, compared to £950 in December 2023, Compare the Market says.
This marks the cheapest monthly average premium since May 2023 when the average a motorist was paying was £718.
While the drop will be welcomed by hard-up drivers, it still means the average premium is £105 more expensive than December 2022, when it was £624.
The drop is likely to be part due to a stabilisation in the cost of claims for insurers as inflations has slowed in recent months.
This comes after This is Money reported car insurance prices dropped a record amount at the end of 2024 as competition in the industry started to heat up again.
The average cost of car insurance has fallen by £221 year-on-year, new research from Compare the Market shows
Young drivers have come out on top with the decline in premiums, seeing the largest fall in their insurance costs of any age group, while older drivers have seen only a small fall comparatively.
The average premium for drivers aged under 25 has dropped £425 annually to £1,577.
But the average cost of car insurance for motorists aged 80 and above has only fallen £61. However, premiums are much less expensive, costing on average £627 in December 2024.
Regional drops differed too, with London drivers seeing the steepest fall in average car insurance premiums – down by £370 annually.
Drivers in Wales only saw drops of £62 in their insurance between 2023 and 2024.
But London motorists typically pay the most for car insurance at £1,202, whereas Welsh drivers pay around half of this at £620.
Julie Daniels, of Compare the Market, says: ‘Many motorists will be delighted that the cost of car insurance has declined significantly compared to last year.
‘As household budgets experience wider pressures, cheaper car insurance will be welcome news following the steep insurance price increases seen in previous years.’
Young drivers have come out on top with the decline in premiums – the average has dropped £425 year-on-year to £1,577
Automatic cars £217 pricier to insure
The other influence on insurance premiums is a car’s transmission, with the data showing a significant difference between automatic and manual cars.
The average cost of car insurance for an automatic vehicle was £860 in December 2024 – £217 more than the average for a manual car in the same month.
The average manual premium was £643.
This is because automatic cars usually cost more to insure as they tend to be more expensive to buy than manuals.
Automatic gearboxes are also more costly to replace and fix as they are more complex than manual ones.
Car insurance premiums saw record fall in 2024
Car insurance premiums dropped significantly over the course of 2024
Last month we reported that the General Insurance Price Index showed car insurance premiums fell 5.5 per cent during the fourth quarter of 2024, bringing the total reduction in the second half of the year to 10 per cent.
Every month since April saw consistent drops in prices, with a total reduction of 16 per cent in prices for drivers across 2024, down from a peak of 46 per cent higher towards the end of 2023.
Despite the reductions, prices remain 21.4 per cent higher than at the start of 2020.
The fall in prices was attributed to increased competition in the industry, as some insurers opted to make more aggressive cuts in the second half of the year.
Stephen Kennedy, director at Pearson Ham Group, said: ‘This deflation offers much-needed relief for many policyholders, particularly younger drivers who faced some of the steepest increases in previous years.’
