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  • Flexible cover that fits your driving needs.
  • Pay only for the miles you drive.
  • Ideal for occasional and low-mileage drivers.
  • Get a tailored PAYG car insurance quote today.

What is Pay As You Go Car Insurance?

Pay As You Go (PAYG) car insurance is a flexible type of policy. It lets drivers pay based on how much they use their car, instead of a set yearly fee. This makes it a great option for people who drive less often, new drivers, and those who want to save money.

How Does Pay As You Go Insurance Work?

PAYG insurance typically works in one of two ways:

  • Pay Per Mile: The insurance company asks for a monthly fee and a specific price for each mile you drive.
  • Usage-Based Insurance (UBI): This type depends on driving data collected from black box insurance or a small device. It sets the rates based on your driving habits.

Policies can offer temporary cover for short-term driving. They can also provide van insurance for commercial vehicles. Additionally, you can have named driver options for shared cars.

Who Can Benefit from Pay As You Go Car Insurance?

PAYG car insurance is ideal for:

  • New drivers – A flexible option to avoid high annual car insurance costs.
  • Young drivers – Lowers premiums by rewarding safe driving.
  • Low-mileage drivers – If you drive less than 6,000 miles a year, PAYG can help you save.
  • Learner drivers – Provides short-term coverage while practicing in a car from a family member or friend.
  • Drivers with second cars – Great for cars that aren't used often.
  • People who work from home – If you don’t drive to work anymore, PAYG can be less expensive.
  • Temporary car insurance users – Helpful if you only need short-term insurance for test drives or travel.

How Does Pay As You Go Car Insurance Work?

PAYG car insurance sets prices based on how much you drive or how safe you are while driving.

Type of PAYG Insurance How It Works Best For
Pay-per-mile insurance Monthly base rate + cost per mile driven Low-mileage drivers, occasional users
Usage-based insurance (telematics insurance) Uses a black box or mobile app to monitor driving habits and adjust premiums Young and learner drivers, safe drivers
Temporary PAYG insurance Covers short periods (hours, days, or weeks) Road trips, test drives, borrowing a car

With pay-per-mile insurance, companies put a small tracker in your car or use an app on your phone to measure how far you drive. You have a base rate that protects your parked car, and you only pay for the miles you actually drive.

For usage-based insurance, a black box or telematics app follows how you drive. It tracks several things, including:

  • Speed – Driving too fast can raise your premiums.
  • Braking & Acceleration – A smooth driving style can help cut insurance costs.
  • Time of Day – Driving at night might increase costs because of the chance of accidents.
How Does Pay As You Go Car Insurance Work

Types of Pay As You Go Car Insurance Cover

PAYG insurance has three levels of cover, just like regular policies:

Comprehensive Cover (Recommended)

  • Comprehensive insurance protects your car, other vehicles, theft, fire damage, and accidents.
  • It is often less expensive than third-party coverage.

Third Party, Fire and Theft

  • It protects you from damage to other vehicles, fire damage, and theft of your car.
  • It does not cover damage to your own car.

Third Party Only (Minimum Legal Requirement)

  • Covers damage to other vehicles.
  • Does not cover your own car, theft, or fire damage.

Pros and Cons of Pay As You Go Car Insurance

Pros Cons
✅   Cheaper for low-mileage drivers ❌   Can be more expensive for high-mileage drivers
✅   Encourages safer driving habits ❌   Premiums may increase if driving behaviour is risky
✅   No long-term commitment ❌   Not all insurers offer pay-per-mile options
✅   Ideal for temporary car insurance needs ❌   Less likely to build a no-claims bonus
✅   Good option for new and young drivers ❌   Requires a tracking device or mobile app

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How Much Does Pay As You Go Car Insurance Cost?

The cost of PAYG insurance changes depending on how far you drive, how you drive, and other factors. Here is a comparison of the average costs:

Mileage Estimated Monthly Cost (£) Estimated Annual Cost (£)
1,000 miles/year £14 - £22 £168 - £264
5,000 miles/year £45 - £55 £540 - £660
10,000 miles/year £90 - £110 £1,080 - £1,320
15,000 miles/year £130 - £150 £1,560 - £1,800

Note: Prices change depending on age, vehicle type, and driving history.

Do You Need a Black Box for Pay As You Go Car Insurance?

Not all PAYG policies need a black box. However, many insurance companies use telematics devices or smartphone apps. They use these to monitor your mileage or how you drive.

Insurance Type Black Box Required?
Pay-per-mile Yes (or smartphone app)
Usage-based insurance Yes (or smartphone app)
Temporary PAYG No

PAYG vs. Subscription Car Insurance: What’s the Difference?

Feature PAYG Insurance Subscription Car Insurance
Payment Pay per mile or usage Fixed monthly fee
Flexibility Very high Medium
Covers multiple drivers? Yes (with named driver option) Sometimes
Suitable for temporary cover? Yes No

PAYG is a good choice for people who don’t drive often. On the other hand, subscription car insurance can save money for those who drive a lot but do not want a long-term commitment.

PAYG Car Insurance Affect Your Credit Score

Does PAYG Car Insurance Affect Your Credit Score?

Most insurance companies do not do a hard credit check. This means that PAYG insurance usually won’t affect your credit score. However:

  • Missed payments can hurt your credit score if they are reported.
  • Choosing a pay-monthly policy instead of paying all at once may need a soft credit check.
  • Using a web browser to compare policies helps you find the best rate without extra credit checks.

PAYG Insurance for Business & Rideshare Drivers

For people using their car for business use like Uber, Bolt, or delivery driving, PAYG insurance can offer short-term coverage. This coverage can adjust to fit changing work hours.

  • PAYG Business Cover: This is flexible insurance you can use for your business.
  • Temporary Van Insurance: This is perfect for those who drive vans part-time.
  • Comprehensive Cover for Delivery Drivers: This offers more protection for people who drive often.

How Safe Driving Can Lower PAYG Costs

Your driving habits affect the costs of your PAYG car insurance.

  • Black Box Insurance: It tracks how fast you accelerate, brake, and drive.
  • Avoiding High-Risk Hours: Driving late at night can raise your costs.
  • Smooth Driving Reduces Costs: Hard braking may lead to penalties.

Tip: Using a small device to monitor your driving can help you get a claims discount for safe driving.

PAYG Car Insurance for Expats & Temporary Residents

Expats and temporary visitors in the UK can gain from PAYG. This option offers:

  • Short-Term Cover: You don’t need long contracts.
  • Using a Family Member or Friend’s Car: This is available with named driver policies.
  • PAYG for Learner Drivers: If you are new to the UK and learning to drive, you can get learner driver insurance on a PAYG basis.

PAYG and MOT Rules: What You Need to Know

Can you use PAYG if your car has an expired MOT?

No, every car in the UK must have a valid MOT unless it is declared off-road with a SORN. PAYG policies need a valid MOT and road tax as well.

What happens if your MOT expires during cover?

Your car cover might not be valid if your vehicle is not safe to drive.

Solution: Remember to set an MOT reminder when you buy a new quote.

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Is PAYG a Good Option for Learner Drivers?

PAYG is a good choice for learner drivers because it offers:

  • Flexible Cover: You can insure a parent’s car or a friend’s car for a short time.
  • Peace of Mind: This helps lower the extra cost of yearly insurance.
  • Temporary Cover for Driving Lessons: You don’t have to get a full-year policy.

Alternatives:

  • Learner Insurance: These are short-term plans designed for practice.
  • Comprehensive Car Insurance: This type may be best for everyday use.

Common Myths About PAYG Insurance

🚫   Myth: PAYG is always less expensive than standard insurance.
✅   Truth: PAYG can save money for drivers who don’t drive much. However, it might cost more for those who drive a lot.

🚫   Myth: Every PAYG policy needs a black box.
✅   Truth: A few insurers provide PAYG without a tracking device.

🚫   Myth: You can’t get a claims bonus with PAYG.
✅   Truth: A lot of PAYG providers let you build claims bonuses over time.

Hidden Fees & Extra Costs in PAYG Insurance

Fee Type Description
Setup Fees Charged when activating a policy
Admin Fees Costs for making policy changes
Higher Voluntary Excess Some PAYG plans require a larger excess
Extra Cost for Named Drivers Adding additional drivers may increase costs

Tip: Always check the policy details to stay away from hidden fees.

Hidden Fees & Extra Costs in PAYG Insurance

Ways to Reduce Pay As You Go Car Insurance Costs

  • Drive safely – Smooth braking and steady acceleration can help lower your payments.
  • Avoid driving at night – Driving late at night can increase your costs due to a greater risk of accidents.
  • Increase voluntary excess – Picking a higher voluntary excess can cut your monthly costs.
  • Pay annually instead of monthly – This helps you dodge extra interest fees.
  • Install a telematics device – Insurance companies may lower your rates if you drive responsibly.
  • Limit mileage – Driving less means cheaper insurance costs.

Compare Pay As You Go Car Insurance Quotes

If you don't drive very often, PAYG insurance can be a cheaper option than regular yearly plans.

Look at pay-per-mile and usage-based car insurance policies today to find the best deal.

FAQs About Pay As You Go Car Insurance

PAYG insurance costs depend on how much you drive or your driving habits. On the other hand, temporary car insurance gives you set coverage for a short time, which can be from hours to months.

Yes, you need to mention business use when you ask for a quote.

Yes, you might need extra travel insurance for countries in Europe if you are going outside the UK.

Not all insurance companies give no-claims bonuses on PAYG policies. Make sure to check this before you buy one.

It all depends on how much you drive. If you don't drive very often, PAYG can be less expensive than traditional car insurance.

Some temporary insurance policies may offer breakdown cover as an extra option. It's a good idea to check your policy. Make sure roadside assistance is included. If it's not, consider adding it for more protection.

Yes, PAYG insurance is available for different types of vehicles. This includes newer cars, vans, and electric vehicles. The terms and costs of the policy can change based on the type of vehicle you want to cover.

You can get a temporary car insurance quote in just a few minutes by filling in your details online. Most car insurers offer instant cover. This makes it a good choice for your short-term needs.

Yes, all valid annual insurance policies and temporary insurance policies should be recorded in the Motor Insurance Database. If your coverage ends or if you switch to a separate policy, you need to update your details. This will help you avoid any penalties.

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Page last updated on: 13/05/2025

Page reviewed by: Shay Ramani

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