Majority of New Zealanders paying 'lazy tax'

Tuesday, 31 August 2021

Apathy is hitting New Zealanders in the pocket, with almost 90 per cent paying “lazy tax” on financial products, research shows.

“Lazy tax” is the price paid for not shopping around, negotiating and upgrading to the best deal on everything from electricity and gas to home loans and mobile phone plans.

In a survey of more than 2000 people, financial research and comparison site Finder found 87 per cent didn’t think they were getting good value for money on at least one service but hadn’t switched in the past six months.

Income protection insurance, car loans, and personal loans were the products most likely to result in a lazy tax, followed by home and car insurance (43 per cent and 35 per cent respectively) and broadband (35 per cent).

Tax is back in the news. Often this means a looming budget or election, as is indeed the case now, with the government’s 2022 budget delivered next week.

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However, New Zealanders were less likely to stay on a mobile phone plan they didn’t think was good value, with just 27 per cent paying lazy tax on that bill.

The survey found just 13 per cent of New Zealanders weren’t paying any lazy tax.

Men were more likely than women to be paying lazy tax on their home loan (36 per cent compared to 30 per cent), while Gen Z were the most likely to pay on personal loans (64 per cent) and home loans (60 per cent), compared to 38 per cent and 28 per cent of Baby Boomers respectively.

Finder New Zealand editor at large, Angus Kidman, said it was shocking so many people were missing out on a better deal.

“Laziness rarely pays off in life, and it’s no different with your finances. Being complacent often leads to you being worse off,” he said.

“Shopping around and comparing providers on a regular basis should be second nature, not just when you first get the product.”

Getting a better deal on banking products like a home loan could be as simple as calling the lender to negotiate a lower rate, especially for those with a good financial history, Kidman said.

The data showed a third of credit card holders were paying lazy tax, including 54 per cent of Gen Z and 30 per cent of Baby Boomers.

While the average credit card interest rate was 19.4 per cent, some cards had rates as low as 9.95 per cent, Kidman said.

Getting a better deal on banking products like a home loan could be as simple as calling the lender to negotiate a lower rate.

“Loyalty doesn’t pay with your credit card provider. If you haven’t reviewed your rate in a while, you’re likely paying more interest than you need to.”

Balance transfer offers were another way to save money for those with credit card debt.

The offers let customers transfer existing debt to a new card with a low- or no-interest period, giving time to pay off some or all of the balance at low or no cost.

A similar number (35 per cent) were paying lazy tax on their car insurance.

According to Finder analysis, car insurance policies varied by more than $1000 for the same car, location and driver profile.

“Car insurance policies can vary hugely in price, which is why it’s so important to pick the right insurer and policy,” Kidman said.

“Be selective about what extras you actually need, but don’t skimp on cover.”

Drivers could also reduce their premiums with some pre-purchase research into which cars were cheapest to insure.

“The make and model of your vehicle can have a huge impact on your premiums. That’s because some cars are inherently safer and cheaper to repair.

“Reckless driving can also take a toll on your driving record and claims history, which can impact your premiums. Safe drivers typically get the best insurance deals.”

Some insurers also offered loyalty discounts or deals for new customers, and discounts for taking out a policy online.

Half of those with personal loans didn’t think they are getting good value for money, but hadn’t switched providers in the past six months.

Younger generations were more likely to think they are getting ripped off by their lenders, with two-thirds of Gen Z borrowers paying lazy tax on a personal loan, compared to 54 per cent of Millennials, 51 per cent of Gen X, and 38 per cent of Baby Boomers.

“The interest rate on your personal loan is based on a range of factors such as your income and borrowing history, so not everyone can be eligible for the lowest rates on the market,” Kidman said.

“But that doesn’t mean you can’t get a better deal on your loan. For instance, if you took out your loan before interest rates tumbled last year, you might be able to switch to a cheaper rate.”

Kidman said personal loans could be a handy way to pay for things like a wedding or home renovation but should be approached with caution.

“You need to be certain that you’ll be able to make your repayments and still afford basic living expenses.

“And be very wary of payday loans – these are quick short-term loans that come with exorbitant interest rates which can make it difficult to climb out of debt.”