What can we say about car insurance that hasn’t already been said?
A lot, actually.
Allow us to put on our insurance salesperson hat and wow you with the wonders that car insurance can offer you.
One of the most commonly mentioned reasons for buying an insurance policy is the financial safety net it offers and protection against potential ruin.
Car insurance covers the costs of vehicle repair or replacement following an accident, theft, or other non-collision-related damage.
Insurance also means knowing the policy protects you financially against unforeseen circumstances and liability coverage, giving you peace of mind.
And while none of this is new information, reiterating it is imperative, especially when considering how the age of a car impacts insurance costs.
Or, have you never thought to ask that question?
If you haven’t, that’s proof you haven’t heard all that insurance has to offer just yet.
Insurance providers usually use the same method to calculate premium prices (personal information, location, frequency and purpose of use and insurance history).
However, your car’s details matter too.
When it comes to vehicles, insurers consider what it’ll cost them to repair damage, what safety features the car has installed, and the likelihood of theft.
And it’s no surprise that newer cars come chock-full of the latest and greatest in motor vehicle technological advancements.
When a car is fitted with safety features like lane departure warnings or anti-lock braking systems (ABS), the idea is that this helps make the vehicle safer.
But, the downside of all the incredible innovations in your car is that they cost more than a pretty penny, naturally driving up insurance costs.
Repairing your car’s safety features is always higher for newer vehicles due to their more advanced and sometimes more expensive components.
The likelihood of theft is also a major contributing factor.
Specific vehicle makes, such as the Toyota Hilux, Volkswagen Polo or Ford Ranger, are known to attract unwanted attention. This, unfortunately, makes them a higher risk, and their premiums reflect that accordingly.
So, given the hazardous nature of owning a new car, comprehensive coverage is a must!
Equipping your car with this insurance policy is designed to protect you from hefty out-of-pocket costs if your vehicle is damaged or stolen. This policy covers various perils: collisions, theft, vandalism, weather-related damage and third-party liability.
However, as we mentioned before, insurance policies for new cars can run pretty steep.
If your new car is damaged to the point of a write-off, it’ll cost more to replace it, making the insurance premiums high.
And this is where shortfall cover comes in handy.
Given that new cars depreciate the minute you drive them off the dealership floor, you could find yourself in a situation where you owe more than it's worth.
So, shortfall or credit shortfall helps bridge the gap between how much you owe on your car’s loan and what the car’s worth was at the time of a total loss.
Not to scare you, but driving a brand-new financed car and not including shortfall coverage is risky.
If the vehicle is badly damaged, resulting in a write-off, you’ll have to settle the difference out of pocket, which can be financially devastating.
For example, you bought your car for R150 000 and paid R20 000 of your financing loan, and your car gets written off in an accident.
Without shortfall coverage, your insurer will only pay R100 000 (its current retail value), meaning you’ll still owe and have to repay the remaining R30 000.
While it’s not unheard of for insurance for a new car to cost less than an older car, generally, used vehicles will be cheaper to insure.
Older cars usually attract a lower premium as the cost of repairing or replacing their parts is far less expensive than a new vehicle. Furthermore, if your car’s retail value is low, maintaining coverage costs might far outweigh the potential payout in the event of the vehicle’s total loss.
However, all vehicles (new and old) require protection from the perils that be.
Lastly, an insurance provider will also consider a motorist’s driving history regarding what premiums to charge. How many accidents you’ve had with the car tells an informative story of its condition.
Your risk profile changes after an accident or two, making the premiums rise accordingly.
Some insurers even go as far as assessing the car’s mileage.
This is to allow the insurance provider to know the mileage of the vehicle at the purchase stage so they can compare the mileage at the claim stage to prevent fraudulent claims from being processed.
*This is purely a suggestion. The decision to cancel coverage is personal and should only be made in the context of your current financial situation and risk tolerance.
While the coverage needs and requirements may differ, we’re here to tell you that there isn’t a specific insurance policy tailor-made for “new” versus “old” cars.
As we mentioned earlier, premiums will largely depend on the driver’s details and those of the vehicle.
However, this table shows how you can weigh the two options:
Insurance premiums will still differ when the factors are identical; the only difference is whether a car is new or used.
Let’s take a look at how this can be.
Take a random 36-year-old woman who received her driver’s licence in 2014 and has had uninterrupted insurance coverage for about nine years. She lives in a gated estate in Dainfern and wants an insurance quote for her two vehicles.
Vehicle 1: A brand-new 2023 Mercedes-Benz CLA CLA200 AMG Line Sports.
Vehicle 2: A used 2016 Mercedes-Benz CLA CLA200 AMG Line Auto.
A quote with Pineapple for full comprehensive coverage for the 2023 Mercedes will set the woman back about R2554.02 in monthly premiums, at an excess of R5850.
For a 2016 Mercedes, and at the same excess amount of R5850, the premium is a low R1064.59 per month.
There’s a difference between the two, which can be attributed to various factors, namely retail value.
Because of the ‘newness’ of the 2023 model, the repair and replacement costs are higher than its older counterpart, resulting in pricier premiums.
Other factors that can contribute to discrepancies in pricing are the driver’s age and driving record, the location where the car is parked, usage and excess amount.
Our 36-year-old volunteer got their driver’s licence in 2014 and hasn’t claimed or cancelled their coverage in over nine years.
However, given their inexperience, younger, less experienced motorists can expect their premium prices to soar.
The same can be said of drivers with poor driving records; they can also expect to receive higher premiums.
What good is overloading your brain with all this information without offering practical solutions?
Thankfully, we’d never leave you hanging like that.
This is why we compiled this list of helpful tips to aid you in your quest to reduce your car insurance costs.
The best place to start is always by comparing different insurance quotes. This is the only way to know what’s out there, which insurance provider offers what and whether you’re receiving a fair price on your policy.
We understand that this can be easier said than done because accidents are unpredictable, and other motorists’ behaviour isn’t in your control. But what is in your control is your driving record. Steer clear of claims, avoid traffic violations and your premiums will stay low.
Premium price and excess amount are like two sides of a balance scale; when one goes up, the other goes down. If you’re serious about paying low monthly premiums, opting for a higher one-time excess fee is the way to do it. However, this also means you’ll pay more out-of-pocket in case of a claim.
A bonus tip is to seek out insurance policies that offer usage-based options. If you’re someone who isn’t frequently on the road, you can save on insurance premiums with a policy of this kind.
If you’re the proud owner of a spanking new ride, you need to keep a few things in mind, namely what your shiny new wheels can mean in insurance.
You’re sure to turn heads in your car, and insurance providers will desperately vie for your wallet’s attention.
And why wouldn’t they?
The higher repair and replacement costs, the vehicle's safety features, and its attractiveness to thieves guarantee you pay higher-than-average monthly premiums.
Used car owners need not worry too much about this; the vehicle has probably already depreciated.
However, although the risk may be lower, it is ever-present nonetheless.
So, regardless of whether a car is new or used, it's essential to consider its condition, safety features, retail value, and history and choose the insurance policy best suited to the vehicle and the driver's needs.
Your decision between a new or used car means considering the potential insurance costs of each option.
After all, insurance is a crucial factor in the cost of owning a car and can significantly impact your budget.
Whether this impact is positive or negative is entirely up to you.
Carefully prepare by considering your financial situation and current needs, and you may just win the insurance game.
And before making your big purchase, obtain insurance quotes for the cars you're considering to understand the financial implications fully. Doing so will ensure you make the most economically sound decision.
Failure to do so may result in costly consequences.
But fear not; we held your hand throughout this article and aren’t about to stop now.
Pineapple offers not only informative and insightful information but also incredible insurance.
90 seconds is all you need to complete a FREE personalised quote.
It’s the least you could do to scratch our back after we’ve so extensively scratched yours, no?
Click on the link below to jump straight into it and receive your very own comprehensive coverage quote.
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The information provided above is for informational purposes only; you should not construe any such information as legal or financial advice.
Pineapple (FSP 48650) is underwritten by Old Mutual Alternative Risk Transfer Insure Limited, a licensed Non-Life Insurer and authorised FSP. T&Cs apply.
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