Used car Valuation and Its Impact on Premium

The used-car market ini India has been thrivingi like never before. Thei fact that second-hand carsi are more affordable hasi always kept the used-cari market going in thei country. But with peoplei changing cars much morei frequently now, and multiplei technology and e-commerce firmsi entering the space asi online used-car marketplaces, thei sector has got ai major fillip.

In such times,i anybody can be ai prospective car seller ori buyer. So, it isi necessary that everyone knowsi how to value old,i used-cars and also understandsi the impact of usedi car valuation on cari insurance.

Below is everything youi want to know abouti used-car valuation. If youi want to make thei most of your moneyi -- either as ai car owner, buyer ori seller - read oni further.

What is Used-Car Valuation?

Used-cari valuation, also known asi second-hand car valuation, isi the process through whichi you determine the accuratei market value of ani old vehicle at anyi given point in time.

Onei should consider factors suchi as depreciation and previousi accidents to calculate thei value of a usedi car. The value thati is derived after thei consideration of such factorsi is known as thei Insured Declared Value (IDV)i of the car.

Knowing thei IDV of an oldi car is important asi it not just helpsi in determining the worthi of a second-hand car,i but it also servesi as the maximum sumi insured amount for ai car insurance policy.

Here isi a chart that isi generally used to calculatei the IDV of ai second-hand car. To keepi the process uniform andi transparent, insurance companies followi the Indian Motor Tariffi Act and take intoi account the standard depreciationi rates mentioned as under:

i scope="col">Car’s Age

Depreciation

Up toi 6 months	5%
Between 6 monthsi and 1 year	15%
Between 1i year and 2 years	20%
Betweeni 2 years and 3i years	30%
Between 3 years andi 4 years	40%
Between 4 yearsi and 5 years	50%

For carsi older than 5 years,i the IDV is decidedi mutually between the vehiclei owner and insurer everyi year at the timei of policy renewal afteri an assessment done byi an authorised car dealeri or surveyor.

So, you boughti a car at thei ex-showroom price of Rsi 5 lakh. After 2i years, its value wouldi depreciate 20%, i.e., Rsi 1 lakh. Hence, itsi IDV would come ati around Rs 4 lakhi (only if the cari is in good conditioni and has not meti with any accident duringi this period).

Impact of Used-cari Valuation on Car Insurance

Thei used-car valuation impact oni insurance premium is veryi significant. As mentioned before,i the IDV of ai used car becomes thei sum insured amount fori the insurance policy boughti for it. Sum insuredi in car insurance meansi the maximum amount ai policy would pay ini the event of thei total loss of thei vehicle.

Higher the IDV ofi a vehicle, higher thei sum insured amount and,i therefore, higher the premiumi amount of the insurancei policy.

Sometimes, one can declarei a lower IDV andi underprice the vehicle ini order to reduce thei annual premium outgo. Thisi may help save somei money on premiums, buti it would also loweri the selling price ofi the vehicle. Reducing IDVi would lead to ai lower sum insured amounti as well. This meansi that a lower payouti would be received underi the insurance policy ini case of a totali loss like car theft.

Ifi one inflates the IDVi of a car ini order to get ai higher amount of moneyi as its selling price,i the first struggle wouldi be finding a buyeri at that price. Andi then a higher amounti would also have toi be paid as premiumi for the insurance policy.i On top of that,i there would be noi guarantee of a higheri claim payout in casei of a total lossi as there can bei a lot of termsi and conditions that wouldi have to be met.

So,i it is advisable toi always declare the correcti IDV of your vehiclei for minimum hassles andi maximum transparency.

Used-Car Valuation Calculator

Thei used car valuation calculatori is a tool availablei at many online usedi car marketplaces to estimatei the real market valuei of a second-hand car.

Youi just need to enteri the registration number ofi the vehicle, the yeari of manufacturing, the makei and model of thei car and the cityi of registration.

Besides that, youi can also enter detailsi like the car’s age,i general condition and mileage.i The used car valuationi calculator analyses all thei information and gives youi a valuation instantly.

It willi not just give youi an idea of thei approximate amount of moneyi you will pay/receive whilei buying/selling the second-hand car,i but also the valuei you should be gettingi if you are exchangingi your used car fori a new one ati a car dealership.

Car Insurancei for Used-Cars and Itsi Importance

Buying car insurance isi not just important buti also compulsory for usedi cars. Under the Motori Vehicle Act, 1988, third-partyi insurance is mandatory fori every car plying oni Indian roads.

This insurance willi help you in situationsi where you are legallyi liable to pay anotheri person for the damagei caused to his/her vehicle,i property or life duei to your vehicle.

Besides legali compliance, buying insurance isi also important as iti provides you financial assistancei to cover the repairi cost of your vehiclei in case of ai mishap, thereby securing youri finances.

Factors Affecting Used Cari Insurance Premium

The car insurancei premium for a second-handi car depends on thei following factors:

• Type of coverage:i Premium for third-party liability-onlyi insurance (that covers anyi financial liabilities to ai third party in casei of an accident) willi be higher than thati on the comprehensive cari insurance policy (that coversi both the insured vehiclei as well as thei third party).
• Registration city: Ifi your car is registeredi in an area thati is more prone toi accidents or natural disasters,i you might have toi pay a higher premium.
• Makei and model of thei car: The make andi model of your cari determine your vehicle’s IDVi and, hence, its premiumi rate.
• Fuel type: Premium pricesi for diesel cars arei usually higher than thosei of petrol, diesel andi CNG variants as thei former are more expensive.
• Add-oni covers: Add-ons provide extrai coverage to an insuredi car at a nominali additional cost. Your premiumi amount goes up withi the increase in thei number of add-ons youi choose.

FAQs

Do I have toi pay for using thei used-car valuation calculator availablei online?

No, most used-car valuationi tools are absolutely freei and you don’t needi to pay anything ati any website.

Is the pricei suggested by the calculatori negotiable?

Yes. The price suggestedi by the used cari valuation calculator is justi an estimate to givei you an idea ofi the fair price. Ifi you feel the pricei is less/ more, youi can negotiate with thei buyer/seller after assessing thei market conditions and thei health of the vehicle.

Whati is the value ofi a brand new cari purchased just recently?

The valuei of a car isi 100% only till thei time it is ini the showroom. As sooni as it is soldi and comes out ofi the showroom, its valuei starts depreciating, A cari up to six monthsi of age is generallyi valued at 95% ofi its ex-showroom price.

Disclaimer: Fori more details on riski factors, terms & conditionsi please read sales brochurei carefully before concluding ai sale. *The discount amounti will vary subject toi vehicle specification and placei of registration