Why your car dropping in value does not make your insurance cheaper

Why your car dropping in value does not make your insurance cheaper

The costs associated with repairing a vehicle have a much larger effect on your monthly vehicle insurance premiums than depreciation, according to Budget Insurance.

“Many people assume that the biggest risk to their vehicle is theft or a complete write-off in an accident – and that the actual value of their vehicle is the major determinant of the insurance premium price,” said Tyrone Lowther, head of Budget Insurance.

“This is not the case.”

According to Budget, a relatively low percentage of accident-damaged vehicles are written off and an estimated 90% of vehicles involved in accidents are repaired and put back on the road.

Repairing damages to modern vehicles is a costly exercise, with motorists having to pay much more this year to fix their vehicles than at the same time last year, despite their vehicles depreciating by as much as 15%.

Modern vehicles have plenty of technologies that drive up the cost of repair significantly, such as integrated headlight units, bumpers and fenders with parking sensors, and airbags and sensors – to name a few.


Many new vehicles are imported, too, meaning spare parts must also be imported. This further increases costs in a pandemic-delayed global supply chain.

“Therefore, what may look like minor damage to the untrained eye can, and often does, cost tens of thousands of rands to repair,” said Lowther.

“In fact, most of the insurance premium goes towards covering the vehicle against accident damage and paying for damages caused to other person’s vehicles and property.”

Lowther said that while the market value of your car might decrease as time goes by, your insurance premium is providing cover against damage more than anything else.

This leads to your monthly vehicle insurance premium staying the same or even increasing, as your insurer must be able to “viably cover the risk”.

Lowther added that motorists must read through their insurance policies and schedules to gain a full understanding of what they are signing up for, and whether their insurer will provide premium benefits based on the depreciating value of their car.

SEE | 12 crucial driving tips that could combat the ever-increasing fuel prices in SA

SEE | 12 crucial driving tips that could combat the ever-increasing fuel prices in SA

South Africans have been hit with another price hike on fuel prices. Diesel and petrol increased by R1.48 and R1.21 per litre, respectively, bringing the cost per litre to under R20 – and over R20 per litre in central parts of the country. This will not be easy on South Africans’ budgets as it will have a damning effect on things we need to see to our basic needs.

The CEO of MasterDrive, Eugene Herbert, says: “This is one of the most significant fuel price increases South Africa has faced in some time. Whether you’re an individual or a company, it is bound to affect your pocket. For companies, it increases the price of delivery which then trickles down to the consumer. Now consumers are paying more for both goods and petrol.”

To counter the latest price increases’ financial stresses on South African households, Budget Insurance shares vital tips that could see motorists get the most mileage from a full tank of fuel.

Fuel-saving tips

1. Service smart: A car can burn up to 30% more fuel if proper maintenance is not performed on a regular schedule, so make sure that your vehicle is serviced regularly. Things like worn spark plugs, worn rings, faulty injectors, sticky brakes, low coolant levels, dirty oil, and dirty filters all lead to inefficiency and higher fuel consumption

2. Wheel wise: Check your car’s wheel alignment. Bad wheel alignment causes more friction, which takes more power to overcome and results in higher fuel consumption.

3. Pressure check: Check for underinflated tyres, as these, too, increase resistance.

4. Air con costs a cool buck: Use the air conditioning only when necessary, as it places additional load on the engine.

5. Deadweight: Reduce the vehicle’s weight by removing unnecessary items from it and, if you mostly do city driving, consider driving with only half a tank of fuel.

6. Nice and slow: Don’t speed. The gas-guzzling effects of “stepping on it” are well-known.

7. Don’t stop-start: Maintain momentum by looking and planning ahead, flowing with traffic, and better time your approaches to hills, traffic lights, and crossings. Also, avoid idling for longer than 30 seconds.

8. Easy on the engine: Keeping your revs between 2 500rpm and 3 500rpm can reduce your petrol consumption by up to 20%. In diesel vehicles, the rpm can be as low as 2 000.

9. Geared for efficiency: Drive at the lowest speed in the highest gear that the road and traffic conditions allow, without labouring the engine.

10. Tech-savvy: Many vehicles have economy settings to optimise performance, throttle response, ride height etc., for maximum fuel efficiency. Use them to your advantage.

11. Plan ahead: Use your GPS to check for traffic and avoid problem areas. Do several tasks on one round trip, as opposed to many shorter ones. This eliminates unnecessary mileage and saves time.

12. Wait out the rush: Battling through traffic not only increases fuel consumption, but also causes wear and tear, especially on your vehicle’s transmission and brakes.