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Pay As You Drive Car Insurance
Save money on car insurance by only paying for the amount that you drive.
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If you don't use your car very often, or only drive short distances, you might be able to save money on your premium by finding an insurance policy that rewards low-usage.
Sometimes, these are called pay-as-you-drive policies - but they're not your only option. You can also find car insurers that offer lower premiums to people who drive less, as standard.
This guide will explain the pros and cons of pay-as-you-drive cover, provide insight into the cost compared to more traditional car insurance, and - hopefully - help you decide if it's right for you.
What is pay-as-you-drive car insurance?
Pay-as-you-drive car insurance - sometimes called pay-as-you-go - is comprehensive car insurance with a twist. You get the same level of cover, but you only pay for the kilometres you drive. It's great for people who don't drive very often, or only travel short distances.
However, while some insurance companies advertise specific pay-as-you-drive policies, there are other, less obvious ways to access a cheaper premium if you're not driving very much.
That's because some car insurers take estimated mileage into account during the quote process. So although they're not selling a specific pay-as-you-drive insurance policy, you're still claiming a reward for low usage.
If you only use your car from time to time, you might find you're better off using one of these insurers, or purchasing a pay-as-you-drive policy.
Which insurers offer specific pay-as-you-drive car insurance?
Which insurers reward low mileage?
We requested multiple quotes from over 30 different car insurance brands in Australia. We used the same driver profile, but changed the estimated mileage. Not all of the insurance brands offered a reduced price for lower estimated mileage.
Here are some that did:
| Average annual mileage | ||||||
|---|---|---|---|---|---|---|
| Brand | 5,000km | 7,000km | 15,000km | 30,000km | Potential saving between 30KM and 5KM | Get a quote |
 | $686 | $709 | $749 | $809 | $123 | Get quote |
 | $608 | $666 | $885 | $1055 | $447 | More info |
 | $775 | $800 | $845 | $913 | $138 | Get quote |
 | $700 | $723 | $764 | $835 | $173 | Get quote |
 | $548 | $570 | $602 | $686 | $138 | More info |
 | $720 | $744 | $786 | $849 | $129 | More info |
 | $394 | $398 | $398 | $426 | $32 | Get quote |
 | $895 | $914 | $933 | $1,101 | $206 | More info |
 | $693 | $716 | $756 | $817 | $124 | More info |
 | $839 | $909 | $927 | $1,024 | $185 | More info |
 | $909 | $940 | $960 | $1,075 | $166 | More info |
*Quotes accurate as of 23 April, 2020. Based on a driver profile of a 50-year-old woman, living in Sydney. Car details were for a 2015 Ford Fiesta, with an excess set as close to $800 as the insurer would allow.
How does pay as you drive work?
There are some differences between policies but, generally, this is how pay-as-you-drive car insurance works. This type of system typically applies to any policy which rewards drivers with a lower premium for low mileage.
- Set the amount of kilometres you expect to drive. Your premium is calculated with this figure in mind. The less you drive, the less you pay.
- Disclose your odometer reading. Alternately, some insurers will install a device in your car which tracks how much you drive.
- Top up if required. If you expect to go over the amount of predicted kms, you can contact your insurer and top up your policy. Some insurers will even credit any unused kms to your account, or offer a discount if you're driving less than you expected.
- Be aware. If you don't top up but drive too many kms, or your insurer thinks you deliberately underestimated your usage, you may have to pay an additional excess for any claims, or have your claim denied. Some insurers may change your policy to a less comprehensive cover once you exceed your estimated mileage.
How much does pay as you drive cost compared to normal insurance?
Real Insurance is one of the few car insurers in Australia which offers both comprehensive car insurance, and policies aimed specifically at people who don't drive very far.
We used the same driver profile as above and requested quotes for a pay-as-you-drive policy, and a comprehensive policy. Both policies have the same level of cover, but our research found a significant price difference.
| Estimated annual mileage | ||||
|---|---|---|---|---|
| 5,000km | 7,000km | 15,000km | 30,000km | |
| Pay as you drive | $597 | $738 | Doesn't qualify | Doesn't qualify |
| Comprehensive | $923 | $1,031 | $960 | $,1043 |
| Potential saving | $326 | $293 | N/A | N/A |
Can I update my existing estimated mileage?
Yes! If your driving habits have changed and you're on the road a lot less, you might be able to access cheaper premiums from your car insurer.
Just give your insurer a call, say your situation has changed, and ask for a new quote. If you've prepaid for an annual policy, your insurer may provide a partial refund and if you're paying monthly, they may drop your premiums moving forward.
Is pay as you drive better than a normal policy?
If you don't drive very far every year, a pay-as-you-drive policy might be better for you than normal comprehensive car insurance because you get the same cover, for a cheaper price.
Just remember, you'll have to keep your insurer updated if your driving habits change, otherwise you risk extra fees or even a denied claim.
Is pay as you drive insurance right for me?
It's worth considering pay as you drive insurance if you don't drive very often or don't drive very far. Typically, this can include:
Multiple-car owners - If you split your driving between more than one car, or use another car for the bulk of your driving, a pay as you drive policy may be a good option.
Weekend drivers - If you typically cycle to work, or use public transport to commute, your kilometres will likely be much less than the average person.
Seniors - Seniors typically drive less than the average population. Why not reap the rewards and enjoy a more affordable premium too?
What are the pros and cons?
As with anything, there are some upsides and downsides to pay as you drive car insurance. You should always consider both, before committing to a policy.
| Pros | Cons |
|---|---|
| Can get comprehensive cover at a lower price | May be charged an additional excess, or have your claim denied, if you exceed the kilometre limit |
| Rewards those don't drive very often or very far | Only suitable for people who drive less than average |
| Can be topped up or reduced if your driving habits change | Requires more policy management than traditional policies |
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