Is pay-as-you-drive insurance and car sharing the future of driving?

By Olivia Gee ·
Driver wearing a face mask during COVID-19

COVID-19 has really been a game changer when it comes to driving. Many people may now require a private way to get around, or might be rethinking the need for their car during lockdown.

World Car-Free Day rolls in on September 22 this year, encouraging motorists to give up their wheels for the day to minimise air pollution. It’s one of many initiatives linked to drivers reducing their carbon footprints, but it brings up a couple of other questions, too. 

Firstly, can Aussies live without their cars in the post-pandemic world? And then for the more financially astute drivers: how much does owning a car cost and are there any cheaper alternatives? 

How much does car ownership cost in Australia?

Every car owner knows there’s a lot more than petrol that goes into keeping a car on the road. You’ve got to think about car insurance, registration, repairs, parking costs and more.

According to recent figures from car sharing service Car Next Door, this all adds up to around $7,000 a year for a small vehicle and upwards of $11,000 for a larger ride.

Car sharing on the rise

Firstly, let’s not get car share services confused with rideshares like Uber or Ola – these act more like taxis. 

Instead, car sharing literally involves borrowing other people's cars, or renting out your own, for a set number of hours or days. Each provider will have different rules and processes for things like insurance, fuel usage and wear and tear. 

Generally, borrowers will be directed by the company website or app to cars of varying sizes and values being rented out nearby. Then you simply book online for the time you need (often charged at an hourly or day rate) and follow instructions on how to pick up the keys. 

Why use a car share service?

It’s a useful option for people who can drive but don’t own a car, as it’s often cheaper and more flexible than a hire car. 

For example, Car Next Door offers rental vehicles from $5 an hour or $25 a day. The company’s co-found Will Davies said they’ve seen a jump in borrowers due to COVID-19 travel restrictions and social distancing requirements on public transport.

“People are definitely travelling more irregularly, which begs the question of whether buying a car this year is a wise choice,” he said. “Since April, borrower applications are up 40% as people who don’t have access to a private car have started shying away from public transport.”

For car owners sharing out their vehicles, this kind of opportunity can help offset car-related costs. 

“We’ve also seen a 50% uptick of car listings as those who have cut out the daily commute by working from home are sharing their car to supplement their income,” Davies said. 

What is pay-as-you-drive car insurance?

If you’re not keen on someone else scooting around in your ride, you might consider pay-as-you-drive insurance to drive down your car bill. 

This can come as an option within comprehensive policies, and is kind of like a premium reduction for customers who drive less. When you take out this kind of policy, your odometer is recorded and then monitored monthly - or at the end of the policy period - to ensure you’re driving under the set or negotiated kilometre limit. 

Some providers will let you bump up your kms if it looks like you’re going to exceed the limit, but this could come with a fee. And remember: you could have trouble making a car insurance claim if you’ve tipped over your limit without informing your insurer.

Which insurance companies offer pay-as-you-drive policy options?

There are a fair few providers offering pay-as-you-drive cover, including many new tech-savvy contenders. Check out a few options below:

Head to Mozo’s car insurance comparison page for more details on comprehensive policy options.

Compare Car Insurance - page last updated September 19, 2020

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Olivia Gee
Olivia Gee
Money writer

As one of Mozo’s money writers, Olivia Gee shares her research and insights across banking, insurance and property to help readers save. She loves getting stuck into a story, unveiling all the facts, breaking down stats and drawing on personal experiences - this is what drives her as a journalist. She has a double degree from the University of Wollongong, with a BA in Journalism as well as Media and Communications.