Insurance is one of those adult things that school didn't prepare you for. We're inundated with TV commercials and radio ads all telling us that so-n-so offers the best deal on your car and household insurance. Getting a good deal is one thing, getting the right cover is another.
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With rising vehicle prices and a weak South African Rand forcing the prices of imported vehicles up even further, one cannot afford to be without insurance. It's the safety net that can help ensure that you're left in the same financial position after an accident that you were before. As most new vehicles are financed and thus owned by the bank that it is financed with, it's legally required for you to have comprehensive insurance to safeguard against a complete loss of the asset (your vehicle).
On this grounds, it then would seem that used cars should be more affordable to insure, should they not? This is a complex answer and not always a straightforward one either.
Is it cheaper to insure a used car?
In theory, it should be but that's not always the case. It's entirely possible to purchase a used car that has a greater value than that of a new car and this would see the monthly insurance premiums costing more than that of the new car. You see, insurance is based largely on the value of a vehicle and the costs associated with repairing it to the condition that it was before the accident. Rare or uncommon cars could cost more to repair as parts availability means that only new items can be fitted or that the items need to be imported in order to carry out the repair.
Insurance premiums are calculated based on a variety of factors. Your personal risk profile comes into play but so does the costs associated with repairing your chosen vehicle. The cost of replacement parts, their complexity and the specialized knowledge required to repair them all come into play.
For example, it's entirely possible for you to pay R200 000 for a brand new KIA Picanto or spend the same money on a used BMW X3. One would think that the used BMW would be cheaper to insure but that's not the case. With the parts prices costing considerably more for the BMW, the used vehicle is the one that will end up costing you more to insure.
Hijack and theft risk also hikes insurance premiums making know target vehicles like the Toyota Fortuner and Volkswagen Polo more expensive than their contemporaries. It's always best to receive a quotation on the vehicle you're considering buying before committing to the purchase in earnest.
Percentage values
If one works on percentage values, expensive new cars are more affordable to insure. The premium on a R1 000 000 car could be R2 000, coming in at 0.2% of the vehicle's value, while the premium on a used car of R200 000 could be the same R2 000, or 1% of the vehicle value, thus making the used car 'cheaper' to insure. However, at the end of the day, you're still being charged R2 000 each month for your coverage.
