Low mileage drivers could save more than £140 each year by switching to pay-by-mile car insurance.
This is according to new research from Compare the Market, who highlighted the potential savings for drivers.
The comparison site claims almost a fifth of motorists (18%) who drive less than 5,000 miles could save £123 on average by swapping to a pay-by-mile policy.
One in three (33%) who drive less than 2,000 miles per year could find a pay-by-mile policy will save them an average of £141.
Compare the Market says the average annual cost of a pay-per-mile policy is £585, but this falls to £430 for motorists who drive less than 5,000 miles per year.
For those who drive less than 2,000 miles per year, the average annual fee is £306.
Some insurance providers claim you could also save money if you're driving between 6,000 and 7,000 miles each year - but this might not always be the case.
We explain how pay-by-mile car insurance works - and if it can really save you cash.
What is pay-by-mile car insurance?
As the name suggests, pay-by-mile car insurance is simply where you 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 - so when it is parked.
You're then given a unique per-mile rate, which is normally a few pence, for each mile you drive.
When you get a quote, you'll be given a price based on your estimated mileage for the year.
But as you're charged on how often you drive, the policy can fluctuate depending on how many miles you actually do.
The insurance company keeps track of the number of miles you drive through a "telematics" device or special tag that is fitted to your car.
With some newer cars, you can connect your insurance policy to your mileometer.
By Miles is a specialist provider offering this service, and claims it could work out cheaper for someone driving less than 7,000 miles per year.
RAC also offers a pay-by-mile car insurance policy and puts the saving figure at 6,000 miles or less.
We used the By Miles online calculator to get a quote based on our car and how many miles we drive. Its calculator estimated that I drove around 6,700 miles last year.
It then told me I would be charged an annual parking fee of £179, plus a pay-by-mile rate of 3.5p per mile.
This added up to an annual estimate of £395 - which is more expensive than the £334 I pay for my annual car insurance right now.
However, if I did find myself driving 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 down your current provider is also a good way to save cash.
Alex Hasty, director at comparethemarket.com, said: "Motorists are increasingly driving fewer miles each year, whether that’s to save money or to do their bit for the environment.
“Many may also be working from home more often following the pandemic, and do not need to commute to work as frequently.
“Our research shows that switching to a pay-per-mile policy could save low mileage drivers more than £100. Given the cost-of-living crisis, these savings could help drivers who are looking to cut driving costs.”
