Pay-as-you-go car insurance

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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 a fixed amount, what you pay depends on:

Pay-as-you-drive car insurance could be a good option if you only use your car occasionally.

To get cover you’ll usually need a small device from your insurer (and sometimes an app), to track how many miles you drive.

Types of pay-as-you-go car insurance

Pay-per-mile insurance

The main type of PAYG insurance, designed for people who don’t drive very far.

You pay on a rolling monthly basis, based on how many miles you’ve driven. The less you drive, the less you pay.

Learn more: how mileage affects your car insurance.

    Pay-per-hour/per-day

    This type of pay-as-you-drive car insurance usually covers you for just a few hours, days or weeks. That way, you can drive somebody else’s car, or somebody else can drive yours.

      Black box (how you drive)

      Telematics insurance uses a black box to track how you drive.

      Drive safely and you could be rewarded with lower premiums, which can also help young or new drivers.

      It’s slightly different from pay-as-you-go insurance:

      • Cover is usually bought for a full year

      • Any savings tend to show up at renewal

      • Some insurance providers may adjust your price during the year or offer rewards for safe driving.

        Pay-per-mile car insurance: the basics

        Pay-per-mile insurance is a type of cover where what you pay is linked to how far you actually drive.

        It’s aimed at those who drive less than the national average mileage each year.

        Here’s how it typically works:

        • Your mileage is tracked using an app or a small device in your car

        • You pay a base cost for cover (either monthly or annually)

        • On top of that, you pay a pre-agreed price for each mile you drive

        • There’s also usually a small extra charge to cover the time your car is parked, (again paid monthly or annually).

        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?

        Pay-per-mile insurance focuses on how far you drive, not how you drive. Unlike telematics or black box policies, it doesn’t keep tabs on things such as:

        • Your speed

        • Breaking and cornering

        • The time of day 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. Always check your policy documents to be sure of any exclusions.

        What’s covered?

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          Comprehensive pay-as-you-go cover

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

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

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

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          Third-party, fire and theft PAYG car insurance

          Third-party, fire and theft insurance offers the same cover as third-party but also covers your car against fire and theft.

        What may not covered?

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          Driving abroad

          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.

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          Non-family members added as named drivers,

          Non-family members added as named drivers, so you might not be able to add a friend to your policy.

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          Modified cars

          A modified car if you haven’t told your provider about the modifications.

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          Electric cars

          Electric cars – you may need a specific policy tailored to electric vehicles.

        Can I add extras to my PAYG insurance policy?

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

        Breakdown cover – roadside assistance if your car breaks down.

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        Courtesy car cover

        Courtesy car cover – a temporary replacement vehicle if your car is being repaired.

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        Personal accident cover

        Personal accident cover – could pay out compensation if you or your partner are injured (or killed) in a car accident.

        Car with legal contract

        Legal expenses

        Legal expenses – covers legal fees if someone makes a claim against you.

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        Additional driver cover

        Additional driver cover – covers extra drivers added to your policy (but remember, their mileage will be monitored too).

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        Multi-car insurance

        Multi-car insurance – lets you cover more than one car on the same policy.

        Fuel pump

        Misfuelling

        Misfuelling – can cover repair costs if you use the wrong fuel.

        Car keys

        Lost keys cover

        Lost keys cover – covers the cost of replacing your keys if they’re lost or stolen.

        Windscreen

        Windscreen cover

        Windscreen cover – pays for windscreen repairs or a replacement.

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        European car insurance

        European car insurance – covers you in Europe.

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

        Who is and isn't suited to pay-as-you-go-car insurance?

        Who does it work well for?

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          Older drivers – if you’re retired and driving less than before.

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          Parents no longer having to drive their kids around, so doing less mileage.

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          Remote workers – if you work from home, you might only use your car at the weekends and during holidays.

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          Weekend car users – if you commute by public transport during the week and only use your vehicle at the weekend.

        Who doesn't it work well for?

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          High mileage drivers – PAYG insurance could cost you a lot more than standard cover.

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          Those who like predictable bills – the amount you pay each month varies because it’s based on how far you drive.

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          Drivers of commercial vehicles – if you’re regularly using a van for work, for example, PAYG car insurance could work out extremely expensive.

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          New drivers or convicted drivers – some PAYG providers need you have a full licence for two years and/or at least one year’s no claims discount.

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          Classic car drivers – PAYG policies may need a black box, which isn’t compatible with some older car models. Classic car insurance typically considers that this type of car isn’t driven as much as a standard one.

        Amy Rootham

        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.”

        Amy Rootham, Insurance expert

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

        Pros

        • 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 stay claim-free during the length of your PAYG policy .

        Cons

        • Can end up being expensive if you drive more than you expected

        • 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.

        Is car insurance cheaper if I drive less?

        It could be. Driving less can be one way you can bring down the cost of your car insurance. That’s because if you’re on the road less, you’re statistically less likely to make a claim. This can mean less risk for the insurance provider.

        The price of car insurance on several factors, including where you live, your age and what kind of car you drive.

        Total annual mileage

        Cost of comprehensive insurance3

        0 to 999

        £731

        1,000-1,999

        £692

        2,000-2,999

        £655

        3,000-3,999

        £660

        4,000-4,999

        £666

        5,000-5,999

        £658

        6,000-6,999

        £569

        7,000-7,999

        £590

        8,000-8,999

        £552

        9,000-9,999

        £508

        10,000-10,999

        £576

        11,000-11,999

        £489

        12,000-12,999

        £505

        13,000-13,999

        £508

        14,000-14,999

        £509

        15,000+

        £629

        How to find cheap car insurance

        If your mileage doesn't bring your premiums down, there are other things you can do to find cheaper car insurance...
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        Shop around and compare quotes

        This is one of the easiest ways to find an insurance policy that meets your needs and budget. With Compare the Market, you could save £485 when comparing car insurance quotes3.

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        Pay a higher voluntary excess

        Car insurance excess is the amount you pay towards a claim. Choosing to pay a higher voluntary excess can mean cheaper premiums.

        In fact, our data shows that people typically save £73 by upping their voluntary excess from £0 to £1004.

        Just make sure you can afford to pay the combined voluntary and compulsory excess if you do need to claim on your insurance.

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        Choose a car in a lower insurance group

        Vehicles with smaller, less powerful engines tend to sit in lower (and cheaper) insurance groups.

        According to our data, cars with <1.0 engine typically cost £532 to insure, compared to 2.0-2.4 engines which cost £6803.

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        Pay annually instead of monthly

        Paying monthly tends to include interest, making it more expensive overall. According to our data, customers who pay monthly pay £225 more than those who pay up front.

        The typical cost for people paying annually is £500, compared with £714 for those paying in monthly instalments.3

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        Build and protect your no-claims discount

        The longer you drive without claiming, the bigger your discount. Consider adding no-claims discount protection to your policy, so you don't risk losing it if you did need to claim.

        Drivers with 4-6 years' NCD typically save £243 on their car insurance compared to those with 1-3 years4. That's a significant saving worth protecting.

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        Add an experienced named driver

        Putting an additional driver on your policy could reduce your premium by £158, taking it from £681 to £523 a year4.

        Just be careful to avoid fronting, where you list someone as the main driver if they're not going to be – this is fraudulent.

        Read more: how to reduce the cost of your car insurance.

        More car insurance guides

        Find out more about car insurance, including tips on specialist cover and how to reduce the cost of your premium

        Stock Image of two people in the front and passenger seat of a car adjusting the settings on the console
        Borrowing & sharing
        Driving someone else’s car
        Learn how insurance works when driving a family member's car
        Cost & savings
        The effects of annual mileage on car insurance
        Find out more about how mileage affects the cost of cover
        Policy & cover
        Can I get insurance on my parents' car?
        Key considerations to think about when insuring yourself on a parent's car
        Cost & savings
        How to get cheaper car insurance
        See our practical tips on cutting the cost of your cover
        All car insurance guides

        Car insurance group checker

        Check your car's insurance group and how it could affect your premium

        FAQs

        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 time.

        This is typically anything from one hour to one month, depending on your insurance provider.

        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?

        If you cancel your cover before the policy end date, you may:

        • Have to pay a cancellation fee if you cancel before your policy’s end date

        • Be charged a fee to cover the costs of returning your tracker.

        Check the policy details to see what potential fees apply.

        What happens to my data and information?

        Your driving data is only used by your pay-as-you-go insurance provider to track how far you drive.

        But it may be shared with police after a serious accident and they need it as evidence in court.

        Every provider will have a policy on how your data is kept safe. Read this carefully so you understand how your data will be used.

        Are there any curfews or night-time driving restrictions?

        Typically, there aren’t any rules covering when you can and can’t drive on a pay-by-mile policy. But this isn’t always the case.

        Check with your insurance provider to see if there are any restrictions on when you can drive.

        Can I get pay-per-mile car insurance for an electric vehicle?

        Pay-as-you-go car insurance policies are available for hybrid and electric cars but not all models are covered by all providers.

        Looking for something else?

        Man in carCar insurance
        View of a motorway from a car dashboardComprehensive car insurance
        View out of the passenger windowTemporary car insurance
        Amy Rootham
        Reviewed 18 Sept 2026 byAmy RoothamInsurance expert

        Amy helps make sure you get the best value when choosing insurance. Thanks to more than four years’ experience at Compare the Market, she understands what people look for, working closely with insurance providers to offer you deals and services that are fair, easy to understand and right for your needs.

        Methodology

        1 Correct as of June 2026.

        2 Based on the % of respondents claiming they have used Compare the Market in the last 12 months vs. other leading PCWs. Source: Savanta BrandVue Financial Services, National Representative Survey of 12,257 respondents (June 2026)​

        3 Based on 51% of customers who compared quotes for this type of policy in June 2026.

        4 Based on 51% of customers who compared quotes for this type of policy in August 2026.