Pay-as-you-go car insurance

Pay-as-you-go insurance can work out cheaper if you’re a low-mileage motorist. Find out how pay-as-you-drive car insurance works and if it’s the right option for you.

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What is pay-as-you-go car insurance?

Pay-as-you-go (PAYG) car insurance is a flexible, personalised alternative to an annual policy.

Instead of paying a set amount, premiums are based on how far you drive. Or, in the case of telematics insurance, how well you drive.

Pay-as-you-drive car insurance could be a good alternative to a standard car insurance policy if you only use your car occasionally.

Types of pay-as-you-go car insurance

Pay-per-mile insurance

This is the main type of PAYG insurance. Aimed at low-mileage drivers, pay-per-mile car insurance is a rolling, pay-monthly contract based on the number of miles you’ve driven. The less you drive, the less you pay.

Learn more about how mileage affects your car insurance.

Pay-per-hour/per-day insurance

This type of pay-as-you-drive car insurance typically offers temporary cover for a few hours, days or weeks. That way, you can drive somebody else’s car, or somebody else can drive yours.

Pay how you drive or telematics insurance

Telematics insurance is not strictly pay-as-you-go insurance but uses a black box to monitor driving habits and rewards safe driving with lower premiums. It can also help young or new drivers to get lower premiums.

Unlike PAYG, it’s usually an annual premium and you only see the benefits at renewal. But some providers adjust premiums during the year to reflect your driving behaviour. Others will give you extra rewards or benefits for driving safely.

What is pay-per-mile car insurance?

Pay-per-mile insurance is a type of cover where premiums are based on how far you drive. It’s aimed at those who drive less than the national average mileage each year.

Pay-per-mile car insurance uses a device or app to track the number of miles you drive. You pay a base rate – either monthly or yearly – for cover, then a pre-agreed fee per mile.

You’re also charged an additional amount – either monthly or yearly – to cover the time when your car is parked.

If you have a newer car, your insurance provider may be able to connect directly to your milometer.

What does pay-per-mile car insurance measure?

Unlike a telematics or black box policy, your insurance provider won’t monitor your driving performance by recording speed, braking, cornering and the time of day you drive. The device should only track how far you drive.

Not all pay-per-mile policies work in the same way. So, make sure you understand any restrictions, what’s being measured and how that affects what you’ll pay.

What does pay-as-you-go car insurance cover?

Most pay-per-mile car insurance providers only offer comprehensive insurance. But you may be able to get third-party cover if you pay annually.

Comprehensive pay-as-you-go cover

This is the highest level of PAYG car insurance. It can cover you for damage or injury to someone else and their car, as well as cover for your own vehicle. Comprehensive insurance is also often the cheapest option.

Third-party pay-as-you-go car insurance

This is the minimum legal level of cover you need. It covers you for damage or injury to someone else and their car. Third-party pay-as-you-go car insurance doesn’t cover damage to your vehicle.

Third-party, fire and theft PAYG car insurance

Third-party, fire and theft insurance provides the same cover as third-party. But, as the name suggests, it also covers your car against fire and theft.

What doesn’t pay-as-you-drive insurance cover?

Pay-as-you-drive insurance might not cover:

Driving abroad, because the monitoring isn’t as effective overseas. Some pay-by-the-mile providers do cover this, so check before you buy if this is important to you.
Non-family members added as named drivers, so you might not be able to add a friend to your policy.
A modified car if you haven’t informed your provider about the modifications.
Electric cars – you may require a specific policy tailored to electric vehicles.

There could be other exclusions, so check your policy documents to be sure.

Who does pay-per-mile car insurance work well for?

Pay-per-mile car insurance could be great for:

Older drivers – if you’re retired and driving less than before.
Parents no longer having to drive their kids around, so doing less mileage.
Remote workers – if you work from home, you might only use your car at the weekends and during holidays.
Weekend car users – if you commute by public transport during the week and only use your vehicle at the weekend.

Who isn’t suited to pay-as-you-go car insurance?

While pay-as-you-drive car insurance offers flexibility, it’s not right for everyone. For example, it might not be the best option for:

High mileage drivers – for whom PAYG insurance could cost a lot more than standard cover.
Those who like predictable monthly bills. Like to know how much is coming out of your account each month? Then pay-as-you-drive car insurance might not be the best option for you.
Drivers of commercial vehicles – if you’re regularly using a van for work, for example, PAYG car insurance could work out extremely expensive.
New drivers or convicted drivers – some PAYG providers require you have a full licence for two years and/or at least one year’s no claims discount.
Classic car drivers – PAYG policies require a black box, which isn’t compatible with some older car models.

What are the advantages of a pay-per-mile insurance policy?

Could be more economical for low-mileage drivers
Puts you in control – if you need to save money one month, you could drive less and save on fuel costs and insurance
Good for second cars that aren’t used very often
Can help you build a no claims discount if you remain claim-free during your PAYG policy duration.

What are the disadvantages of a pay-per-mile insurance policy?

Can end up being expensive if you drive more than you anticipated
Payments can feel complicated – you may need to pay an upfront payment, a monthly fee and a monthly mileage cost
Lack of flexibility – some policies limit when you can drive
Minimum age limit with some policies makes PAYG unsuitable for young drivers.

How much is pay-as-you-go car insurance?

Here’s how much your pay-as-you-go car insurance could cost, based on the number of miles you drive each year:

Total annual mileage	Average pay-by-mile premium ^[1]
0 to 999	£809.14
1,000-1,999	£745.96
2,000-2,999	£742.49
3,000-3,999	£743.45
4,000-4,999	£743.96
5,000-5,999	£720.35
6,000-6,999	£639.95
7,000-7,999	£674.28
8,000-8,999	£614.39
9,000-9,999	£544.19
10,000-10,999	£645.02
11,000-11,999	£511
12,000-12,999	£535.69
13,000-13,999	£528.66
14,000-14,999	£527.76
15,000+	£701.87

^[1] 51% of Compare the Market customers were quoted less than the prices above for their car insurance in April 2025.

It's important to note that how much you pay also depends on your driving history, age, occupation and where you keep your car.

If your mileage doesn't reduce the cost of your insurance, there are other ways you can get cheaper car insurance.

How to find cheap pay-as-you-go car insurance

If your mileage doesn't bring your premiums down, there are other things you can do to find cheaper pay-as-you-go car insurance:

Improve your car’s security features – adding an immobiliser or steering lock may help bring your premiums down.
Pay a higher voluntary excess – this is the amount you pay towards a claim, and the higher the excess the lower your premiums tend to be. Just make sure you could afford the full excess amount if you needed to make a claim.
Choose a car in a lower insurance group – vehicles with smaller, less powerful engines tend to sit in lower insurance groups and are cheaper to insure.
Shop around and compare quotes – this is one of the easiest ways to find an insurance policy that meets your needs and budget.

Read our guide for more tips on how to reduce the cost of your car insurance.

Why compare pay-as-you-go car insurance with Compare the Market?

When you compare pay-as-you-drive car insurance with Compare the Market, you could quickly weigh-up which policies suit your needs and budget.

Our comparison service makes it easy to compare cheap pay-as-you-go car insurance quotes.

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Can I add extras to my PAYG insurance policy?

You may be able to add the following extras if they’re not already included:

Breakdown cover – roadside assistance if your car breaks down.
Courtesy car cover – a temporary replacement vehicle if your car is being repaired.
Personal accident cover – could pay out compensation if you or your partner are injured (or killed) in a car accident.
Legal expenses – covers legal fees if someone makes a claim against you.
Additional driver cover – covers extra drivers added to your policy (but remember, their mileage will be monitored too).
Multi-car insurance – lets you cover more than one car on the same policy.
Misfuelling – can cover repair costs if you use the wrong fuel.
Lost keys cover – covers the cost of replacing your keys if they’re lost or stolen.
Windscreen cover – pays for windscreen repairs or a replacement.
European car insurance – covers you abroad.

Not all extras are offered by all pay-per-mile insurance providers. So, check the policy details to see what can be added.

What our expert says...

“For lower-mileage drivers, pay-per-mile policies could be the most cost-effective way to cut the cost of car insurance. This flexible cover can also benefit motorists who aren’t sure how much they’ll use their cars, as payments are based on the miles they actually drive.”

- Julie Daniels, Motor insurance expert

Can I compare pay-as-you-go insurance quotes?

Shopping around and comparing quotes is one of the easiest ways to find the cover you need at a price that suits you.

Here’s a quick summary of PAYG car insurance to help you decide if it’s right for you:

Pay-as-you-go car insurance can be a flexible option for those who don't need an annual policy. It could work well for people who don’t drive often, older drivers or weekend car users.
The main types are pay-per-mile insurance and pay-per-hour/day insurance.
A related cover type is pay how you drive or telematics insurance, which uses a black box to monitor driving and rewards safe driving with lower premiums.
To get a quote, enter your details into our comparison tool and we’ll show you a range of deals to choose from.

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Frequently asked questions

Is temporary car insurance the same as pay-as-you-go car insurance?

No, unlike pay-as-you-drive insurance, temporary car insurance isn’t ongoing. It only covers you for a set period. This is typically anything from one hour to one month, depending on your insurance provider.

Do I need a black box to get pay-per-mile insurance?

Yes, you’ll need a device to record your mileage, which comes from your insurance provider. This can be as small as a matchbox. You may also need to install an app on your smartphone.

Is pay-per-mile insurance suitable for new drivers who have just passed their test?

PAYG insurance might be suitable for new drivers. However, some providers need you to have held a full licence for two years and have at least one year’s no claims discount.

Check policy details to see if you’d be covered.

I have classic car. Can I get pay-per-mile insurance?

Probably not. Classic cars usually don’t have the socket for the device that tracks how far you drive. It’s only been standard in cars manufactured since 2002.

But classic car insurance typically takes into account that this type of vehicle isn’t driven as much as a standard car.

Is my no claims bonus protected?

If you’ve built up a no claims discount, you should be able to transfer this to your new pay-per-mile car insurance policy.

Will I be charged if I cancel my policy?

In some cases you may have to pay a cancellation fee if you cancel before your policy’s end date. You may also be charged a fee to cover the costs of returning your tracker.

Check the policy details to see what potential fees apply.