Research by the RAC Foundation has found that motorists made over 30,000 claims for vehicle damage as a result of poor roads in the last financial year.
The study examined data from 204 local authorities in Britain and found that the average value of a claim was £432, but the average payout was just £306.
Hampshire was the council with the highest number of claims made against it at 1,952, followed by Surrey (1,412) and Hertfordshire (1,369).
Of the claims made, councils only paid out in just over a quarter of completed cases.
RAC Foundation director Steve Gooding said: "These figures are symptomatic of the inadequate funding available for local road maintenance.
"Year in, year out, the backlog of work on local roads is estimated to run to several billion pounds."
He added: "A pitted road surface isn't just a problem for motorists - for those on two wheels it can be life threatening.
"Just last week the Chancellor acknowledged that there had been decades of underfunding in the nation's infrastructure and that he was keen to support targeted, value-for-money public investment. Providing the funds to fix our roads would be a great place to start and would show rapid results."
Martin Tett, transport spokesman for Local Government Association, said: "Councils are right to pay out if people have genuine claims. However, they will continue to crack down on spurious claims to protect the public purse and use this money to fix roads."
"Long-term and consistent investment in local road maintenance is desperately needed to improve road conditions for motorists and cyclists."
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