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There is now one pothole for every mile of road according to data gathered from councils by Britannia Rescue.
Figures obtained under a Freedom of Information Act request showed that councils have paid out a total of £2.5 million in compensation to motorists in the past financial year for pothole damage to cars.
The company also said that a survey of 2,001 UK adults had shown they had suffered car damage as a result of poor road surfaces in the past 12 months.
Britannia claimed the combination of a harsh winter followed by a dry summer had particularly harmed road surfaces and exacerbated the problem.
It added that UK councils had received 32,600 compensation claims in 2012/13 for everything from potholes ruining wheel rims, to puncturing tyres and damaging suspension - an increase of 79% from 2011/12.
The company said that local authorities in England, Wales and Scotland paid out a total of £2.5 million in compensation for pothole or other road damage in 2012/13.
One of the country's largest local authorities, Lincolnshire County Council, reported pay-outs amounting to more than £358,665 in 2012/13.
Britannia said councils had rated King Lane in Leeds, the B6273 South Moor Road/Moor Lane in Barnsley, South Yorkshire, and Holly Lane in Banstead, Surrey, as some of the worst roads for potholes in the UK.
The company described road maintenance in the UK as "severely under-funded with around £16 spent per driver on maintaining road surfaces and fixing potholes - less than 10% of the annual road tax bill".
It added: "Short-term fixes are often chosen over longer-term solutions, with close to a quarter (23%) of councils admitting they usually temporarily fix potholes rather than resurface the area.
"The average cost of repairing a pothole is around £50, meaning the amount paid out by councils in compensation could have been used to repair more than 50,000 potholes."
The average repair bill for pothole damage to a vehicle in the last 12 months was £140. The most common problems were tyre damage, damaged suspension and damaged wheel rims.
Britannia Rescue managing director Peter Horton said: "Britain's pothole epidemic has resulted from years of under-investment in our roads and has been exacerbated by recent harsh winters.
"Local authorities face difficult choices in the roads they prioritise for repair and we now have around 200,000 potholes on UK roads. Motorists should protect themselves and their vehicles by reducing their speed on potholed roads, and also reporting damaged roads to their local council."
Britannia Rescue issued Freedom of Information requests to 434 UK city, district, borough and county councils. Of these, 146 responded with at least one piece of data, while 289 were either yet to respond, said that they did not keep the data, or that they were not responsible for road maintenance in their area.
Newly-appointed Transport Minister Robert Goodwill said "Councils have been given billions by the Government for maintenance and filling potholes on local roads and the public expects them to use that money."
Professor Stephen Glaister, director of the RAC Foundation, said: "This report probably underestimates the scale of the problem, certainly when it comes to compensation payouts. The Local Government Association says that in 2012 councils in England and Wales stumped up £32 million to recompense motorists who had suffered damage to their vehicles.
"Our previous research shows that roads are being resurfaced less and less often, and that the poor state of our highways is the biggest single transport concern among voters."
Peter Box, chairman of the Local Government Association's economy and transport board, said: "Decades of underfunding, severe winters and recent widespread flooding have left large swathes of our roads in disrepair with many councils struggling with a £10 billion repair backlog and only able to patch up a deteriorating network.
"Despite our best efforts, the situation will only get worse as councils contend with deep central government funding cuts and spiralling compensation costs for pothole damage.
"Councils need increased and consistent funding to invest in the widespread resurfacing projects which our roads network desperately needs if we're to see a long-term improvement."