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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 pay as you go car finance or black box car finance, is a form of Hire Purchase (HP) agreement designed to help people with bad credit get a used car on finance.

This includes anyone who's in receipt of benefits, ex-bankrupt, has a County Court Judgement (CCJ) or previously served in the Armed Forces, as well as people with a poor credit history that have previously 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 depends on the price of the car, 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.

How Is Pay As You Drive Different?

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

Your chosen finance company will arrange for a specialist technician to fit the black box for your pay as you go finance agreement. Usually, the payment reminder device is discreetly positioned under the dashboard or in the glovebox.

At Compact Cars, we have an excellent relationship with several specialist finance lenders offering black box finance agreements. We work with them on a regular basis and can make the entire process of finding a car, applying for finance and having the black box fitted simple and smooth.

How Does The Black Box Work?

As part of the installation process, the technician will connect the black box to the car’s internal computer. Using GPRS functionality, it will be able to communicate with your chosen 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 some finance companies will send you SMS and/or email reminders to help you keep on top of the payments.

Depending on the lender, you might be able to make payments 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'll 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.

What Happens If I Don't Make A Payment On Time?

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. 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.

What Happens At The End Of A Pay As You Drive Agreement?

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 black box 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 your pay as you go agreement has ended because the car remains the property of the lender.

What Are The Benefits Of Pay As You Drive Car Finance?

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 go 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 on their next finance deal 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.

Apply For Pay As You Drive Car Finance Online

Pay As You Drive is a specialist finance product that isn't available at most car dealerships. Here at Compact Cars, we’re authorised and regulated by the FCA to offer pay as you go finance to help you responsibly finance a used car.

We can offer flexible black box finance agreements to suit your budget - check out our dedicated page to see representative finance examples. You can also check your eligibility online by submitting a no-obligation, quick and easy application that won't affect your credit rating.

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