Car Insurance Prices Rise Along With Demand For Used Cars

Car Insurance Prices Rise Along With Demand For Used Cars
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In the midst of the global pandemic, a supply-chain issue has arisen across various industries. The motor industry is no exception, where it is experiencing a significant shortage of semiconductors and microchips for new cars, and for car parts in general.

These shortages have meant that new car sales are reported to have dropped, while a sharp rise in the demand for second-hand vehicles has been seen. Buyers are forgoing long waiting lists for new cars and choosing to buy used cars instead. Old Mutual Insure’s spokesperson, Lizo Mnguni told Business Tech that it was particularly cars made in 2019 and 2020 that had seen an increase in demand.

The higher demand has not excluded the 2019 – 2020 second-hand cars from the global supply chain issues. Second-hand parts for these cars are also difficult to source and more expensive than before.

To read the full Business Tech article, go to https://businesstech.co.za/news/motoring/539072/used-car-prices-in-south-africa-are-soaring-and-its-impacting-your-insurance/

Insurance Premiums Soar As Second-Hand Car Prices Go Up

Hard-to-find second-hand car parts, coupled with increased demand for these models, could mean another higher price paid by consumers, their insurance premium rates at renewal.

Business Tech spoke to Lizo Mnguni, spokesperson for Old Mutual Insure, who said that “Your insurance provider will automatically adjust your vehicle premium at your policy’s renewal using your vehicle’s latest price information to determine the new premium,” and “When the insurer calculates your premium, they account for the total loss should you have an accident or experience damage to your vehicle. Fender benders and bumper damage can be costly to repair … bumper bashings occur far more frequently on our roads than total write-offs. This is why your premium increases at (the) renewal stage even though your car value normally decreases.

The cost of labour and cost of vehicle parts are increasing, which also reflects in your premium. In other words, with the scarcity of many makes and models of vehicles, your car may be worth more than it was when you took out insurance, which means you could be underinsured.”

Mnguni goes on to say “The onus is on the policyholder to speak to their insurer to ensure that the sum that the vehicle is insured for is accurate. Failing which, you may be in for nasty surprises like finding out you are underinsured, if you get into an accident.”

Avoiding Risks When Buying A Second-hand Car

The following tips from Mnguni could assist used-car owners from unpleasant surprises in relation to their insurance:

  1. Policyholders must make sure they are buying their cars from reputable dealers when purchasing used vehicles. Don’t forget to look underneath the hood, so to speak.
  2. You can insure your car for different values. To understand how your premium will be calculated, know the difference between the insured values referred to as retail, trade, or market. Retail value is the cost of your car should you purchase it from a dealership. Trade value is the price a dealership would pay for your car.
  3. Market value is the price a potential car buyer would likely privately offer you to buy your vehicle. So, if your car is written off and you’d like to purchase the same car again, then you’d most likely want to be insured on a retail value basis, as this would cover the cost of buying the equivalent of the written-off car.
  4. There are three types of vehicle insurance cover: Third-party, which is the most basic insurance coverage; third-party, fire and theft; and then, Comprehensive. Comprehensive insurance covers a great many things – some of which you may never have considered as being hazards to your vehicle; Natural Disasters, Falling Objects, Fire, Theft and Civil Disturbances.
  5. While the issue with the second-hand car market isn’t specific to the type of insurance coverage you have, the problem if you don’t have insurance, is that if you drive into a fancy car and are found to be liable, you could spend a large portion of your life paying for a car that is not even yours.

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