Experts are warning that drivers are wasting millions of pounds a year on an "overlooked" car tax fee ahead of new car tax changes launching in less than two weeks.
New data has found that 2.9 million drivers are paying more for their car tax than necessary because they are unaware of a five per cent surcharge.
This surcharge is added to Vehicle Excise Duty (VED) payments when they choose to pay their car tax through monthly direct debit instalments.
Almost two-fifths of motorists (39 per cent) admitted that they didn't know there was an extra cost when paying via direct debit.
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Drivers could potentially save hundreds of pounds by changing the way they pay their car tax
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It has been estimated that 5.6 million people who pay monthly with direct debit are unaware, leading to a total cost of £56.3million a year without realising.
Around half of drivers stated that they would change the way they pay if they knew about the surcharge, meaning 2.9 million people paid more than they needed to, with potential savings of £27.5million.
Tom Banks, car insurance expert at Go.Compare, said: "Setting up a direct debit is an easy way to pay for your yearly car tax, but many drivers don’t realise they're forking out extra for that convenience.
"For some vehicle owners, paying monthly also makes the most sense as it allows you to spread the cost, but those who can afford to pay in full should consider switching to a one-off annual payment to save on the surcharge."
For someone paying £1,000 a year in car tax with a direct debit, they are being slapped with a £50 surcharge every year, which quickly racks up.
Owners of the most polluting petrol and diesel vehicles could be hit the hardest, especially as car tax rates rise in the coming weeks.
The majority of drivers pay by direct debit, either because it is more convenient or because it allows them to budget their money in a more suitable way.
The surcharge is only added to vehicle tax paid monthly or every six months, meaning those who pay annually avoid the charge.
Experts say motorists who can afford to pay their car tax in one lump sum should do so to avoid the additional costs and have peace of mind that they will not be charged more.
Banks suggested that drivers check their payment methods the next time they renew to see if they are being overcharged for using a direct debit.
He said it was a "simple way" to avoid unnecessary and annoying costs, allowing them to secure the best deal they can.
The expert added: "While it’s not possible to reclaim past surcharges you’ve paid, you can avoid any future added fees by switching to a single annual payment when your next renewal is due."
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Drivers are charged more if they pay for their car tax with a direct debit
X/DVLAFrom April 1, new car tax changes will be introduced to mark the start of the new financial year, including a rise in price in line with RPI inflation.
First year rates for newly registered vehicles will also rise, with drivers choosing to buy the most polluting vehicles potentially facing a cost of £5,490.
Chancellor Rachel Reeves announced these changes in the October Autumn Statement in a bid to help drivers transition away from petrol and diesel cars and towards cleaner zero emission vehicles.
