Pay as you go car insurance
Get a great deal on low mileage (pay-per-mile), hourly Pay-As-You-Go (PAYG) car insurance with a quote from Bobatoo and cut the cost of your premiums today.
At Bobatoo, we aim to help UK drivers save money on their car insurance and find cheap quotes every year.
One way to reduce the cost of your premiums is to get a specialist type of policy, such as pay-as-you-go car insurance, which we will explain in further detail below.
To learn about other ways to save on car insurance, read our guide that’s full of useful tips!
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Learn how to save money on your car insurance with our special guide...
What is Pay As You Go car insurance? Who is it for?
PAYG cover is designed mainly for young drivers (under 21), learner drivers or drivers who have only just passed their driving test, as they generally face the highest car insurance premiums due to their high level of risk. Even for a third party, fire and theft (TPFT) policy on an old vehicle, it is likely to cost a lot to get insurance until you start building up a few years No Claims Bonus (NCB).
This is because young and new drivers (usually 17 and 18-year-olds) are seen as posing a higher risk by car insurance companies, who deem them more likely to have accidents and make a claim on their policy.
How does it work? Types of pay-as-you-go cover:
- Telematics insurance
- Pay-per-mile car insurance
- Pay-per-hour car insurance
1. Telematics (Black Box) Insurance
Thankfully, modern technology can help young drivers save on the cost of car insurance – particularly telematics or ‘black box’ technology. A black box car insurance policy is one of the most well-known types of pay as you go car insurance, offering cheaper, more customised cover to young drivers who only intend to drive a certain mileage each year.
A black box device is fitted to your car, and it tracks:
- How fast you drive (acceleration)
- What times of the day you drive (rush hour, etc.)
- How often you drive and for how long
- The quality of braking (harsh braking may suggest reckless driving)
- How many miles you drive (mileage)
- Where you drive
This information is passed onto your insurance company, who will then determine a ‘driving score’. The better this score is, the cheaper your premiums will be.
However, some drivers may not feel comfortable with their insurer tracking when, where and how they drive, and many feel that it is too big a price to pay for cheaper car insurance premiums. It completely depends on what you want from your policy, so it is important to weigh up your options and work out exactly which one suits you best before buying a policy.
2. Pay-per-mile car insurance – how does it work?
With this type of pay as you drive policy, the cost of your premiums will depend on how many miles you drive every month. When purchasing general car insurance, you are asked to provide an estimated mileage, and if it is low, your cover works out cheaper and vice versa. With this specialist policy, however, it gives your insurer a more accurate idea of how much you drive, so they are therefore able to offer a more accurate cost for cover.
How much is pay-per-mile insurance?
Insurers track your mileage with a telematics device, similar to black box insurance, and they use this information to determine the cost of your premiums. The cost can differ from case to case, but a good example to use is one provided by Love Money who interviewed a pay-per-mile driver.
The renewal quote with his insurer worked out at £800, but by switching to By Miles, his quote came in at £491.75 - £171.75 for covering the car when it’s parked, and £320 to cover his mileage for the year (10,000). By making a conscious effort to cover less miles, he could end up saving much more.
3. Pay-per-hour cover
Similarly to the above types of PAYG car insurance, a pay-per-hour policy tracks how much time you spend driving on UK roads instead of mileage. Your premiums are then based on how much you drive, rather than the amount of miles driven.
Again, your insurer will track this data by using a device such as a black box or plug and drive, with an app to go with it so that you can view the information, too.
With both pay-per-mile and pay-per-hour policies, your insurer will charge you a flat rate to protect your car while it’s stationary, and any extra cost will be charged based on your mileage or hours spent on the road (depending on the specific policy).
Depending on your insurer, you should be able to check your driving and insurance information by logging into your online account or smartphone app. Some will also provide you with tips on how to further improve the quality of your driving and therefore, reduce your insurance costs.
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Short-term car insurance – Is it the same as PAYG?
Also known as temporary cover, short-term car insurance generally works the same as standard insurance, as your insurer will use your estimated mileage limit to work out your premium, along with other factors like the type of car it is, your age, etc. Drivers usually choose this policy if they only want to be covered for a few hours or days – you would need to find a specialist insurer that offers this.
There is no use of a telematics device with this type of cover to track driving skills, which is the main difference between short-term insurance and PAYG cover.
How much is pay as you go car insurance? Is it cheaper than standard cover?
As a way of reducing the cost of car insurance, PAYG policies are certainly an option worth considering.
The price of your cover will be tied into how many miles you want to drive during the life of your policy – which typically lasts for one year.
When purchasing a PAYG policy, your insurer will charge you a fixed rate (annual or monthly) for the time that your vehicle is stationary. On top of this, you will be given another rate ‘per hour’ or ‘per mile’ that you drive. If you don’t drive that much, a pay-per-hour or pay-per-mile policy can help to save you money on your premiums.
If you choose to get temporary (short-term) cover, the cost will depend on how much you need insurance for – whether it’s a few days or months, etc. This is probably going to work out much cheaper than buying a standard annual policy for people who don’t need to drive frequently.
Black box insurance tracks how sensible you drive, so the cost of telematics cover can work out a lot cheaper if you abide by the rules. The main thing to remember with this type of cover, however, is that it often makes premiums cheaper for younger drivers in comparison to older drivers.
According to research conducted by MoneySuperMarket, an average 20 to 24 year old could save just under £400, while a 50 to 65-year-old could save just over £200.
As always, the cost of each policy differs on a case-by-case basis and depending on the insurer, so it is important to shop around and compare quotes to make sure you are getting the best deal.
To get a quote with the help of Bobatoo today, simply go back to the top of this page and tap the green button.
Other ways to get cheaper car insurance
If you have reservations about getting a pay as you go car insurance policy, then there are other things you can do to reduce the cost of car insurance.
One common way for new and young drivers to get cheaper car insurance is to take the Pass Plus advanced driving course.
This is taken after you pass your standard practical driving test and goes through extra things like night-time driving and bad weather driving. As a Pass Plus certificate demonstrates you are a more experienced and well-rounded driver, most insurers will reduce the cost of the premiums they quote as you will be deemed as less of a risk.
Another popular method is to add an older, more experienced driver as a named driver on your policy. Just be careful that you do not commit the crime known as fronting – read our guide on car insurance fronting here.
For more tips on how to save money on your car insurance premiums, read our useful guide: 10 tips and tricks for cutting the costs on your car insurance.
Compare quotes and save money on PAYG car insurance
At Bobatoo, we try to help people save as much money as they can when it comes to insurance premiums.
To see how much you could save and to get a cheap pay as you go car insurance quote, tap the green button at the top of this page to compare prices now!