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What Is Pay As You Drive Car Finance?

Compact Cars, Bridgend

April 23, 2019 at 10:21 AM

Pay As You Drive car finance, also known as Black Box car finance, is a form of Hire Purchase (HP) finance agreement primarily designed for people with bad credit. This includes anyone with a County Court Judgement (CCJ), in receipt of benefits, ex-bankrupt or previously in the Armed Forces, as well as people with a generally poor credit history that have been refused finance.

Just like any other HP agreement, you need to make an initial payment (deposit) followed by scheduled monthly repayments for an agreed term.


The amount you need to pay each month will change depending on how much of a deposit you’re able to put down and how long you want the agreement to last – the longer the term, the less you’ll pay each month.

IMPORTANT NOTE: During the repayment period the car remains the property of the finance company. Ownership only transfers to you once all the scheduled payments have been made.

Pay As You Drive car finance is different from a traditional HP agreement because a payment reminder device will be fitted to the car you’re financing. The black box looks similar to the telematics devices used by insurance companies; however, it is solely used as a payment reminder and does not monitor driver behaviour or affect the car’s performance in any way.

Once a successful Pay As You Drive finance agreement has been made, the finance company will arrange for a specialist technician to fit your black payment reminder box. Usually, they’re discreetly positioned under the dashboard or in the glovebox.


As part of the installation process, the technician will connect the box to the car’s internal computer. Using GPRS functionality, it will be able to communicate with the finance company and act as a hi-tech payment reminder for the driver.


Typically, the black box will flash red three days before payment is due. Some devices may also emit a beeping noise and certain finance companies will send you SMS and/or email reminders. Depending on the lender, you might be able to make payment via an online portal. If not, you can pay over the phone using a credit or debit card, or ideally, you can set up a Direct Debit or Standing Order.

Once the payment has cleared, you will receive a code that needs to be keyed into the box. The light will then stop flashing red and go back to green for the rest of the month until the next payment is due.


In the event you don’t make a payment on time, you won’t receive the activation code to turn the black box from flashing red back to green. Most lenders offer a 30-day grace period after your payment date which allows you to continue using the car while you sort the payment out.

If payment still hasn’t been made after the grace period is over, the car will be remotely immobilised using the GPRS connection previously established. Although this sounds potentially dangerous, you can rest assured that the car will never be immobilised while you’re driving.

The system will wait until the car is sat idle with the engine switched off – you will not be able to use the car again until the next payment is made and the new activation code is entered. Depending on the finance company and the terms and conditions of your agreement, you may also be charged late payment fees.


As with any Hire Purchase agreement, once you’ve made all the monthly payments and paid the option to purchase fee (normally £50), you become the official owner of the car.

At this point, the finance company will arrange for the payment reminder device to be removed by a specialist technician – you will no longer need to pay a monthly fee or enter an activation code to drive the car. The black box cannot be removed before the end of the agreement because the car remains the property of the lender.


Benefits of Pay As You Drive Car Finance



Reminded to make payments on time

Increased security payment will be made

Build up repayment record to improve credit rating

Reduced default rates

Weekly payment options available


Access to mainstream lenders after completion


There are a number of benefits for both lenders and customers. Finance companies can have increased confidence and security that they will receive the money owed to them by customers previously considered to be too risky to be offered a finance solution.

In addition, statistics have shown that the payment reminder device has helped to reduce car finance payment default rates by up to 500%. By making payments on time and not falling into arrears, customers with bad credit are able to build up a repayment record that in-turn helps to improve their credit rating.

After one successful Pay As You Drive car finance agreement has been completed, it could open the door to ‘prime’ mainstream lenders and finance plans. With this, customers will be offered lower and more competitive APRs and interest rates to make the payments even more affordable.

Finally, if monthly repayments aren’t suitable for you, some lenders offer weekly payments. As a result, the amount you’re paying is smaller and more manageable. You’ll also receive more frequent reminders that a payment is due to keep you on track with your agreement schedule.


Here at Compact Cars, we’re authorised and regulated by the FCA to help you finance a car. We can offer flexible Pay As You Drive agreements to suit your budget and you can check your eligibility online in a no-obligation, quick and easy application.

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