Everything You Need To Know About Car Valuation And Insurance
Updated On Oct 15, 2023
Read this article to find out what car valuation is with respect to car insurance.
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Cars are like any other machines. They too go through constant wear and tear as you use them. This wear and tear reduces the overall value of the car owing to the constantly decreasing efficiency. This constant wear and tear is known as depreciation. Although you maintain your car perfectly, depreciation is inevitable. However, its extent largely depends on various determinants. Read on to find out.
What Is Car Valuation?
Car valuation is the process that every car undergoes to determine the current market value of the car. This is by considering various factors like the model of your car, its date of registration, number of services, etc. The valuation of your car is done when you purchase a car insurance policy in order to determine the cost of your premium. It is also done when you sell your car or while purchasing a used car.
What Are The Factors That Impact Car Valuation?
Car valuation is done mostly based on factors that determine the extent of its depreciation. The following are the factors that play a major role in valuation of your car-
Make And Model of Your Car
The brand of your car can have a major impact on your car’s value. This is irrespective of the quality and condition of your car. Some car brands are known for rapid depreciation of their auto parts while a few other brands are known for their long-term performance. Luxury car manufacturing brands like BMW, Audi, etc have a significantly higher market value when compared to other economical brands. Hyundai, Toyota and Honda are marked at the top in the mass-market for retaining a higher resale value. Thus, depreciation varies from brand to brand.
Performance of Your Car
The performance of your car determines the condition of its parts. This will thus help determine the value of your car in the market. If your car has aftermarket accessories that are up to date, your car is likely to have a higher market value. In some cases, these add-ons can also result in extra costs. Your car insurance company is likely to charge a higher premium for these modifications. But, having any security enhancing systems will fetch you a discount on your car insurance premium.
You may also like to read:- How does Car Value affect Insurance Premiums?
Year of Manufacturing
New car models are released every year. Every newly released car is equipped with parts and features that fit the requirement of the year in which it is manufactured. A car that was manufactured 2 years back will have fewer features when compared to a car released this year. Thus, the year of manufacture is taken into consideration while determining your car’s market value. If your car has all the features required for contemporary use, it is likely to cost you a higher premium as well as a higher resale value.
Overall Condition of The Car
Your car will have a higher market value if it is maintained properly both in terms of its mechanics, and appearance. Appearance wise, the interior and exterior of your car must be clean and fresh looking without dents or scratches. The appeal of your car has a major say in its market value. If you have a car that is in good condition, you may have to pay a higher premium for your car insurance but, you will also get a higher car insurance claim settlement amount when you claim your insurance.
Most car valuation criterias or algorithms are updated on a real-time basis regularly to be up to date with the latest market developments. Thus, the market value of your car depends on the factors like model of your car, condition and performance. With the passage of time your car is bound to face depreciation. This will reduce the market value of your car depending on its extent. Make sure to purchase a car insurance that offers you maximum coverage and save yourself from any financial liabilities that come with owning a car.
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.