As excited as you are to drive your new car off of the showroom and into the big world, the truth is that, as soon as it leaves the showroom, its value begins to depreciate. Later on, the vehicle sustains wear and tear, builds up dirt in hard-to-reach places and may even gather a couple of dents or scratches. Eventually, you realise that your car isn’t worth as much as it was when you bought it.
Obviously there are exceptions to the rule, such as classic or collectible car models, which gain value instead of depreciating. This has no similarity to what we are referring to in this article and it is important to make that distinction.
But what we really want to know is how do these two correlate and why don’t these value depreciate together? Why are you paying more for a depreciating product?
Why do premiums increase?
According to an article on the MiWay blog, premiums increase in line with inflation as time goes by. In addition, the cost of repairs, labour and paint increases yearly. If your car ever had to be replaced due to theft or write-off, it would still cost the insurer the same amount as when you first bought the car to replace it.
Tips to reduce your premium
- Check the market value of your car against the amount you are insured for – Calling your insurer once a year may help adjust your premium in line with the market value of the car to account for depreciation.
- Higher excess – this may reduce your monthly premium, but in the case of an accident, the pay in may be very high.
- Better your car’s security features – adding more levels of security helps decrease your premium. If you have added extra security features, inform your insurer and ask for a revised quote.
- Advanced driving licence – having an advanced driving licence makes you a safer driver and your insurer is likely to view you as a lower accident risk.
- Don’t claim too often – The more claims you have made, the higher your premium will be because you have become a higher risk.
- Improve vehicle security – Keep your car in a locked garage or guarded parking lot. This will be viewed as low risk when if comes to theft.
- Update your personal details – Always inform your insurer if you have built a garage, moved to a safer area, moved to a workplace where your car is secured or you work closer to home.
- Sports cars are high risk – keep this in mind when upgrading.
- Driving experience is a thing – younger drivers who have less experience will be charged higher insurance fees.
- Combine your car and household insurance – joint policies may produce more affordable premiums.
- Compare comprehensive insurance quotes – shop around and compare insurance companies. More importantly, read your contract very carefully and ask your broker or insurer to clarify everything.
When financing the payment of your vehicle, comprehensive insurance is compulsory, it’s important to add the cost of insurance to you car budget. These expenses become difficult to maintain but it is important to maintain your insurance. Accidents could lead to financial ruin.