Prices for Used Cars Are Soaring, and That Could Cost Drivers Who Aren’t Even Looking to Buy

You ’ ve probably heard that use car prices have spiked to new highs during the pandemic. What you may not know is that today ’ randomness overheated car market may besides pose a trouble for your car indemnity coverage in the event you have a major accident .
The latest Consumer Price Index data released this calendar month revealed exploited car prices are up by an astonishing 45 % between this June and last — closely nine times the 5.4 % surface in the cost of all goods and services, and one quarter of the 12 % advance in cable car policy premiums during the like period .
Experts attribute the spike to factors including a greater demand for vehicles during COVID-19 and a dearth of new cars as manufacturers wrestle with pandemic-driven output difficulties. Whatever the reasons, the numbers are obviously bad news program for buyers, who could easily pay four figures more for an average-priced ( $ 20,000 ) used vehicle this year compared with 2020 .
fortunately, those “ highly inflated prices ” aren ’ metric ton being used to help determine ( and drive up ) insurance premiums at the moment. according to Mark Friedlander, Director of Corporate Communications at the Insurance Information Institute. Brian O ’ Connell, insurance analyst at, agree, saying that “ indemnity prices are rising, but not inevitably due to higher use fomite prices, ”

The bad news, though, is that those high monetary value tags aren ’ deoxythymidine monophosphate being used when insurers calculate the offers they make to car owners when cars are declared a total loss, either. That creates a potentially baffling gap between what you ’ ll experience in an indemnity colonization should your car be “ totaled ” by an accident or other mishap and what it could cost to replace the car in today ’ south marketplace .

A claims offer could fall short of replacement cost

When it comes to the fomite value used to help calculate your bounty and any claims settlements insurers don ’ t heed “ temp changes in the market, ” such as the current “ pandemic-related ” spike, Friedlander says, Rather, they use the slower-changing values reflected in industry listings such as the Kelley Blue Book .
As a result, says John Espenschied, who owns the Insurance Brokers Group in Chesterfield, Missouri, it ’ s more likely than common now that an insurance company ’ mho colony offer will fall short of the actual monetary value of replacing the fomite. And that, he says, makes it all the more significant to research the cost of replacing a car that ’ south been totaled and negotiate with the claims adjuster if the sum that ’ mho offered falls short of that number .
“ If they want to offer the Blue Book respect, you need to say : I can ’ metric ton buy this car again for that price. I need to be made whole. ” such negotiation can be done directly with the adjuster, he says, who may be motivated by the puppy love of having “ one hundred early cases to settle at the lapp time. ” alternatively, he says, you can ask your agent to negotiate on your behalf .
Either way, he says, the more you inquiry your car purchase, the better your chances of success. “ Try to find multiple listings [ of comparable vehicles to your own ], through sources like Auto Trader and the like, that are angstrom accurate as potential to your market — like within a 10- or 20-mile radius of where you live, if possible. ” And be surely that the offer properly reflects any optional extras the fomite had, such as an promote phone system .
Friedlander acknowledges that gaps may exist in this “ unprecedented ” used-car market, and says they should be motivation to negotiate specially hard for the price of a cable car. “ Do your homework when shopping for a use vehicle and don ’ metric ton pay above book value if at all possible. ” To overpay for a car, he says, is to be “ financially vulnerable if you suffer a total loss. ”
As an exercise of the threat from current “ highly inflated prices, ” Friedlander cites 2007 Camry Toyota Solaras with about 120,000 miles on their odometers. These vehicles have a Blue Book measure of about $ 2,000, he says, but some dealers have been selling this model for $ 6,000 to $ 8,000 — or three to four times the official prize an insurance company would use in settling a claim .

By clicking “Sign Up” I agree to receive newsletters and promotions from Money and its partners. I agree to Money’s Terms of Use and Privacy Notice and consent to the processing of my personal information.

You will now receive Money’s Daily Money newsletter at

Reply anytime to let us know how we can improve. Enjoy!

Consider adjusting your coverage

While there ’ s no provision in policy policies that allows you to raise the refilling value of your car in reply to the market, respective early steps may help protect you at the here and now .
If your cable car is fairly modern, consider adding what ’ second known as “ opening coverage. ” If the vehicle was bought new and financed, you were probably required to add this policy extra. It protects you from the dispute between the current measure of the vehicle, as per the industry guides, and the monetary value of replacing it .
There are caveats to getting such coverage, Friedlander warns. The vehicle typically can ’ deoxythymidine monophosphate be more than three years erstwhile, he says, and some insurers will alone write break indemnity for the original owner. If you are eligible for this coverage, however, it costs lone about $ 50 extra a year from your insurance company, Friedlander says. ( He warns, though, that car dealers charge far more for it — $ 400 to $ 700 a year. )
For an older car, you might consider keeping the collision component of your coverage, or even restoring it if you have already dropped it from your policy. This optional provision — which covers you for damage you cause to your own vehicle while at the wheel — is sometimes discontinued by owners of older vehicles when the cost of its premium ( typically a few hundred dollars a year ) exceeds a certain share of the vehicle ’ sulfur successor measure — such as 10 %. Owners of aging cars may besides drop comprehensive coverage, a distinguish component that covers larceny and such perils as damage from flooding .
alleged “ C & C ” coverage doesn ’ thymine protect you from the gap between a colony offer and the cost of buying a vehicle, but it ensures you ’ ll have at least some funds to help you pay for a substitute. Espenschied says he ’ sulfur “ more apt [ now ] to recommend people hang on to both coverages, because of the fact that if you had to go buy another vehicle, it would cost you that a lot more money. ”
That said, he besides urges drivers to look at the specifics for their car and its other coverage, including the impact of your deductible, before dropping or restoring collision and comprehensive examination. “ The mathematics silent may not make feel, ” particularly for a identical old vehicle, he says .
O ’ Connell advises against “ cutting or curbing collision from an overall car policy, unless you ’ re still at home and not driving at all. ” His rationale stems from the changing drive conditions at the moment. “ With more people on the road, the risk is fair excessively relatively high of an accident. As the old allege goes, better safe than blue. ”
ad by Money. We may be compensated if you click this ad. adAds by Money disclaimer Keep those you love safe on the road with an car policy. Progressive offers some of the most flexible and comprehensive car indemnity policies that can be tailored to their needs. Click below to learn more .Get a Free Quote

More from Money:

The 7 Best RV Insurance Companies of 2021

The Best Cheap Car Insurance for 2021
How to Save Money on Your Car Insurance During Coronavirus — and Beyond

Leave a Reply

Your email address will not be published. Required fields are marked *