If you’re like most people, you might have never thought about calculating the value of your car. Usually, the only time people take into consideration the value of a car is when they plan to purchase, sell, or file for an insurance claim.
Speaking of insurance, the way insurance providers value cars can be difficult to comprehend, but it’s important to understand how the whole process of valuing a car works.
This is especially important for Canadians as car insurance is mandatory. For instance, if you live in Ontario, Canada, you should know that the average car insurance Ontario insurance companies offer, can range from $1,500 to $1,900 in annual fees.
If you are interested in finding out more about how car insurance works, take a look below.
Total loss and value of a car
As they age, most cars lose their value. Depreciation is a term used to describe a decline in your car’s cash worth. Once you buy the car, this process of depreciation starts. Simply put, a new car that you have just bought is less valuable than a similar make and model that’s still at the dealership. It’s widely known that your car loses its value the moment you take it off the lot.
Furthermore, a car’s value will drop significantly if it is involved in an accident that causes serious damage to its body or parts. The insurance company might even declare the car an actual total loss if there is extensive damage. When the repair costs exceed the car’s insured value, this is when it becomes a total loss.
When a car or a vehicle is deemed as a total loss by an insurance company, they will usually pay you the value of the car just before the accident.
What reduces the car’s cash value?
Besides depreciation, a car’s value will drop if it is driven frequently. On paper, it is possible to slow down value reduction by not driving the car too much. Insurance companies will compare the mileage of your car with the average mileage for your make and model. They will consider your car’s value lower if it has higher mileage than the average for your car model.
What do past accidents have to do with a car’s worth?
A car’s value will be affected by even minor accidents. Many times, even if repairs are done after an accident, they will not restore the car to its original condition, which means that its value will drop. But, there are many other things that you can do to raise or keep the value of your car.
Besides fixing the needed repairs, you can also clean it, get a paint job, or make upgrades to your car. You may also consider a diminished value claim if your auto insurance allows it. Keep in mind that some insurance companies decide to reimburse car owners for the difference in the value of the car after an accident.
How to increase your car’s cash value?
It is best to keep your car in good condition, so it can be valued at its maximum potential. If you feel your insurance company’s estimate is too low, don’t think that you don’t have options.
An appraisal can be a powerful tool to prove that your car is more valuable than what your insurance company deems it and luckily for you, many dealerships offer free appraisals. Some car owners get appraisals from multiple dealerships every year to get the best estimate.
Sometimes an appraisal may be just what you need to convince your insurance company that your car is worth a lot more. But, expanding further on the topic of finding the right value for your car, you can always look for websites that offer vehicle listings. Of course, these listings won’t give you the exact right amount of your car’s value, but you will have a better picture of what the asking price of your car is.
Final thoughts
Car insurance policies can get a little bit confusing. However, if you use the right tools and have the right tactics, no insurance company will ever sell you insurance below your vehicle’s worth. You need to understand the coverages before you decide to purchase a policy, to get the most value out of your auto insurance.
Also, make sure that you keep your vehicle in top condition and get appraisals whenever you are looking for a new insurance policy or when you are planning to renew it.
