As used car prices continue to climb, countless South African motorists may find themselves under-insured, according to industry experts. A surge in second-hand car prices, coupled with South Africans tightening their belts due to economic recovery and inflation, emphasises the need for sufficient car insurance coverage.
The perfect storm raising used car prices
AutoTrader data indicates a 10% rise in used car prices in the past year. This escalation is an outcome of multiple factors including a shortage of semi-conductors leading to decreased new car supply, and pent-up demand from lockdown. This trend isn’t brand-specific; the entire second-hand car market is experiencing a surge. However, insurance premiums might not always keep pace with this increase, putting motorists at risk if their cars are stolen or written off in accidents.
Car insurance: A necessity, not a luxury
George Mienie, AutoTrader CEO, warns consumers not to compromise on car insurance to save money. With vehicle-related crime escalating in South Africa, it is more crucial than ever to have adequate insurance coverage.
But, are vehicles being insured for less than their replacement value? To answer this question, let’s delve into the typical insurance values.
Understanding your car’s insurance value
As explained by Wynand van Vuuren, client experience partner at King Price Insurance, insurance companies typically work with three values: the retail value, trade value, and market value. While these values are mostly based on the Auto Dealers’ Guide listing by TransUnion, live market data offers a more current evaluation. It highlights how cars are trading in real-time and predicts future trends.
Are you adequately insured
Let’s consider some real-life scenarios. The Toyota Aygo 1.0 (5-door), for instance, is currently* trading on AutoTrader for an average price of R131,006. But the insurance values differ, with a retail value of R115,000, a trade value of R98,700, and a market value of R126,500. If such a car were stolen, the owner might struggle to replace it with a similar model.
Other examples such as the Suzuki Jimny 1.5 GLX and Honda Jazz 1.2 Comfort paint a similar picture. The actual trading prices exceed the retail, trade, and market values, indicating a potential challenge for owners in replacing their stolen vehicles.
The way forward
The best advice is to establish the real value of your car and ensure you can replace it if stolen. Van Vuuren also highlights the importance of comparing like-with-like prices for comprehensive insurance. If you’re still repaying your car loan and owe more than the insured amount, consider taking out credit shortfall cover.
In 2023, this scenario might change if the demand for used cars falls. If supply chain issues and chip shortages for new cars get resolved, this could stimulate demand for new cars, thereby deflating used car prices.
Our parting advice is to regularly check the live value of your car against its insured value.
Click here to find out more about King Price’s car insurance options, and click here or WhatsApp us on 0860 50 50 50 to get a commitment-free quote.
*As at end-June 2023
