With pay-by-mile car insurance, you simply pay for the kilometers driven. But how does it work and what kind of drivers are actually saving money from this kind of policy?
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Low-mileage drivers could save more than £140 each year by switching to pay-by-the-mile car insurance.
That’s according to a new study by Compare the Market, which highlighted the potential savings for drivers.
The comparison site claims that almost a fifth of drivers (18%) who drive less than 5,000 miles could save an average of £123 if they switched to a pay-by-mile policy.
One in three (33%) who drive less than 2,000 miles a year could find that a pay-by-mile policy saves them an average of £141.
Compare the Market says the average annual cost of a pay-per-mile policy is £585, but this drops to £430 for drivers who drive less than 5,000 miles a year.
For those who drive less than 2,000 miles a year, the average annual fee is £306.
Some insurance providers claim that driving between 6,000 and 7,000 miles each year could also save you money — but that doesn’t always have to be the case.
We explain how pay-by-mile car insurance works – and whether you can really save money with it.
What is pay-by-mile car insurance?
As the name suggests, with pay-by-mile auto insurance, you simply pay for the miles you drive.
When you take out a policy, you pay a fixed annual fee that covers your car when it’s not being driven – meaning when it’s parked.
You are then given a unique price per mile, usually a few pence, for every mile you drive.
When you receive a quote, you’ll receive a price based on your estimated mileage for the year.
However, because you are charged for how often you drive, the policy may vary depending on how many miles you actually drive.
The insurance company tracks the number of miles you drive through a “telematics” device, or a special tag attached to your car.
Some newer cars allow you to link your insurance policy to your odometer.
By Miles is a specialist provider that offers this service and claims it could get cheaper for someone who drives less than 7,000 miles a year.
RAC also offers a pay-by-mile auto insurance policy and puts the savings at 6,000 miles or less.
We used By Miles’ online calculator to get a quote based on our car and the number of miles we’ve driven. His calculator estimated I drove around 6,700 miles last year.
It then told me I would be charged an annual parking fee of £179 plus a charge of 3.5p per mile.
This added up to an annual estimate of £395 – which is more expensive than the £334 I currently pay for my annual car insurance.
However, if I drove less, By Miles estimates I would pay £334 for 5,000 miles, £264 for 3,000 miles or £229 for 2,000 miles.
You should always compare prices online to see what other insurers can offer you.
Haggling with your current provider is also a great way to save some cash.
Alex Hasty, Director at comparatormarket.comsaid: “Drivers are driving fewer and fewer kilometers every year, whether to save money or to do something for the environment.
“Many may also be working from home more often post-pandemic and not having to commute to work as frequently.
“Our research shows that switching to a pay-per-mile policy could save low-mileage drivers over £100. In light of the cost of living crisis, these savings could help drivers looking to reduce travel expenses.”
https://www.mirror.co.uk/money/what-pay-mile-car-insurance-27219685 What Is Pay By Mile Car Insurance And Can It Really Save You £140?