USED-CAR VALUE IS BLOWING COVER
ROCKETING second-hand car values could leave motorists underinsured – and thousands of dollars out of pocket – if their vehicle is stolen or destroyed.
The sharp increase in used vehicle prices – some by more than 50 per cent of their 2019 worth – has been triggered by new car supply shortages, international travel bans and a reluctance to use public transport in a Covid-19 climate.
Data from Carsales.com.au shows the median price of a Ford Ranger ute climbed by 34.3 per cent compared with pre-pandemic prices.
Popular vehicles such as the Toyota LandCruiser (56.9 per cent), Mazda3 (38.5 per cent), VW Golf (29.2 per cent) and Toyota Corolla (20.5 per cent) also rose sharply.
Based on these hikes, some used Toyota LandCruisers would have risen by more than $50,000 since Covid hit.
And the spike in prices means many drivers now have insurance policies that may not cover a gap between what their car is insured for and its replacement cost.
James Martin, insurance expert for consumer comparison website Finder.com.au, said people should take a closer look at what their car is worth and what they are insured for, “to make sure you are covered”.
“Underinsurance is when you fail to take out enough insurance to completely cover the costs if
something goes wrong,” he said. “Essentially, when your insurance policy pays out, if it’s not enough to pay for everything that it was intended to cover, then you’re underinsured. With the scarcity of many makes and models of vehicles in Australia, your car may be worth more now than it was when you took out your insurance.
“Not all comprehensive car
insurance policies are created equal. Some have more benefits, while others are overpriced for what they offer … it really does pay to shop around.”
Annabelle Vo, a spokeswoman for the giant IAG group that includes NRMA Insurance, said the pandemic had led to an increase in used car demand, pushing prices up.
“We’ve been aware of this and
the challenge it can present for customers in terms of the market value of their vehicle should they unfortunately suffer a total loss of their vehicle in an accident,” she said.
“We have been adjusting our processes to ease these issues and adjust agreed values or sum insured in line with market trends.”
Sydney publicist Rachel Demarco received less money than expected when her car was written off this year.
The replacement vehicle is insured for a sum that reflects its replacement cost.
“We bought the car second-hand from a family member and got a good deal on it,” she said.
“It’s worth a lot more than we paid for it. But the car is insured for its current market value.”