The Most Underrated Strategy to Lower Auto Insurance Rates

Owning a car can be a pretty expensive endeavor. AAA says that in 2023, it cost drivers an average of $12,182 to own a vehicle. Ouch. And of that, the average yearly cost of auto insurance was $1,765.

Of course, your annual auto insurance cost may be higher or lower depending on different factors. These include:

• Your location
• Your age
• Your driving record
• The type of vehicle you own

But there's another factor that could impact the amount of money you spend on auto insurance. And it could also result in a lot of savings on your premiums.

Is pay-per-mile insurance a good idea for you?

In the wake of the COVID-19 pandemic, a lot of people are working from home permanently. If you're in that boat, or if you happen to live within walking distance of your office and therefore don't have to drive there, then it could pay to see if a pay-per-mile policy is available through your auto insurance company. If so, switching to pay-per-mile insurance could potentially save you a bundle.

With pay-per-mile insurance, you're still paying a base premium to put coverage in place. But from there, you're paying for each mile you drive, as the name implies. And if you don't drive many miles during the year, one of these policies could end up being less expensive than a standard one.

And if you're worried that it's only fancy, high-tech vehicles that are eligible for pay-per-mile insurance, think again. If this is a policy your insurance company offers, it'll generally send you a device you can plug into your vehicle to track its mileage.

It pays to shop around for auto insurance

Not every car insurance company offers pay-per-mile insurance. But if yours doesn't, shop around. And even if yours does offer this option, it still pays to get quotes from different insurers to see which prices are the most competitive.

Of course, you'll also need to do a thorough assessment of your driving to see if pay-per-mile insurance makes financial sense for you. Just because you don't commute to an office every day doesn't mean your car doesn't still get its fair share of mileage.

Let's say you hardly use your car most weeks, but once every other month, you drive 600 miles each way to another state to visit your parents. You'll need to crunch the numbers to make sure you're driving few enough miles otherwise for a pay-per-mile plan to result in savings.

But in general, if you know you don't use your car very often, then it pays to see if pay-per-mile insurance helps you spend less on auto insurance. Certain expenses, like monthly parking fees, won't hinge on your usage. If it costs $200 a month for a spot in a local garage, it doesn't matter how much benefit you're getting from it. The same applies to your annual vehicle registration fee. But pay-per-mile insurance is one car-related expense where the extent to which you use your car could influence your costs in a positive way.