What is Pay-As-You-Go Car Insurance in the UK?
In a Nutshell: Pay-as-you-go (PAYG) insurance — also called pay-per-mile or usage-based insurance — charges you a base premium plus a small fee for each mile you drive. It is designed for low-mileage drivers who want to avoid paying for miles they never drive. Your total cost depends on how much you actually use the car, making it one of the most flexible options on the market.
How Pay-As-You-Go Insurance Works
PAYG policies have two components:
| Component | What It Covers | Typical Cost |
|---|---|---|
| Base premium | Fixed cost covering fire and theft risk, administrative overhead, and the car while parked | £150–£400 per year |
| Per-mile charge | Variable cost covering the additional driving risk | 3p–15p per mile |
Example: If your base premium is £250 per year and the per-mile rate is 6p:
- Driving 3,000 miles/year = £250 + (3,000 × £0.06) = £430
- Driving 6,000 miles/year = £250 + (6,000 × £0.06) = £610
- Driving 10,000 miles/year = £250 + (10,000 × £0.06) = £850
The less you drive, the more you save.
How Is Mileage Tracked?
There are three tracking methods used by UK PAYG insurers:
| Method | How It Works | Providers |
|---|---|---|
| Telematics box | Hardwired device tracks all mileage | By Miles, Insurethebox |
| OBD plug-in device | Plugs into the car's diagnostic port | Admiral Pay As You Drive |
| Smartphone app | Uses phone GPS to track mileage | Cuvva, some newer providers |
| Mileage photos | Take a photo of your odometer at policy start and end | Some providers offer this for non-telematics PAYG |
Unlike standard telematics (black box) policies that monitor driving quality, basic PAYG policies typically only monitor distance — though some combine both.
Is Pay-As-You-Go Cheaper than Standard Insurance?
PAYG is cheaper for low-mileage drivers and more expensive for high-mileage drivers:
| Annual Mileage | Standard Policy (Avg) | PAYG Policy (Avg) | Cheaper Option |
|---|---|---|---|
| 2,000 miles | £750 | £420 | ✅ PAYG saves £330 |
| 5,000 miles | £750 | £580 | ✅ PAYG saves £170 |
| 8,000 miles | £750 | £730 | ✅ PAYG saves £20 |
| 10,000 miles | £750 | £850 | ❌ Standard cheaper by £100 |
| 15,000 miles | £800 | £1,100 | ❌ Standard cheaper by £300 |
BREAK-EVEN POINT: Typically around 8,000–9,000 miles per year. Drive less than that and PAYG saves money; drive more and you're better off with a standard policy.
Pay-As-You-Go for Young Drivers
PAYG can be particularly attractive for young drivers who:
- Have a car but use it sparingly (mostly for weekends or social trips)
- Live in a city where they walk, cycle, or use public transport most of the time
- Want to keep their premium variable based on their control
| Young Driver Profile | Standard Policy | PAYG Policy | Saving |
|---|---|---|---|
| 18-year-old, 4,000 miles/year, Ford Fiesta | £2,400 | £1,100 | £1,300 |
| 20-year-old, 6,000 miles/year, Vauxhall Corsa | £1,800 | £1,050 | £750 |
| 22-year-old, 3,000 miles/year, city car | £1,500 | £700 | £800 |
However, young drivers with PAYG policies are often subject to restrictions similar to telematics policies — including curfews and driving score monitoring — if the PAYG policy uses a telematics box.
PAYG vs Standard Telematics (Black Box)
| Feature | PAYG / Pay-Per-Mile | Standard Telematics |
|---|---|---|
| Primary pricing factor | Miles driven | Driving quality (speed, braking, cornering) |
| Curfews | Sometimes (if telematics-based) | Very common (11pm–5am) |
| Mileage limit | Unlimited (pay per mile) | Fixed limit (6,000–10,000 miles) |
| Driving score penalties | Less common | Very common |
| Best for | Low-mileage careful drivers | Young drivers needing lower premiums |
| Per-mile cost after limit | 3p–15p (built-in) | 5p–15p (penalty surcharge) |
Leading PAYG Providers in the UK
| Provider | Type | Base Premium Range | Per-Mile Rate | Max Mileage (for PAYG benefit) |
|---|---|---|---|---|
| By Miles | Telematics box | £150–£400 | 5p–9p | 7,000 miles |
| Admiral Pay As You Drive | OBD plug-in | £200–£500 | 4p–10p | 8,000 miles |
| Insurethebox | Telematics box | £180–£350 | 6p–15p | 6,000 miles |
| Cuvva | App-based | £250–£600 | 3p–8p | Variable |
| Ticker | Telematics box | £200–£450 | 5p–12p | 7,000 miles |
Disadvantages of PAYG Insurance
- Costly at high mileage — If your circumstances change and you drive more, costs escalate quickly.
- Upfront base premium — You still need to pay the fixed base cost even in months when you barely drive.
- Device/app dependency — Telematics hardware can fail; app-based systems may drain your phone battery.
- Limited availability — Not all insurers offer PAYG, so you have fewer options to compare.
- Mileage tracking concerns — Some drivers find constant mileage monitoring intrusive.
Key Takeaways
- PAYG charges a base premium plus a per-mile fee — you pay for exactly what you drive.
- It is cheaper than standard insurance up to about 8,000–9,000 miles per year.
- Young drivers can save £700–£1,300 per year compared to standard policies.
- Mileage is tracked via telematics box, OBD plug-in, or smartphone app.
- PAYG is not the same as standard black box insurance — some track only distance, others track driving quality too.
- Providers include By Miles, Admiral Pay As You Drive, Insurethebox, and Ticker.
- If you drive more than 8,000 miles per year, standard insurance is almost always cheaper.
Last updated: July 2026
Disclaimer: This article provides general information and does not constitute financial advice. PAYG insurance terms, rates, and availability vary by provider and individual circumstances. Always read the full policy wording and compare against standard annual policies before committing to a pay-per-mile plan.