Used car prices continue to rise: What to do about car insurance

Person putting 'for sale' sign in the window of a used car and prices rise.

There have been plenty of reports on the rising cost of used cars over the last year, and it’s looking like the trend may persist a little longer.

The most recent used car price index from research group Moody’s Analytics found the value of pre-loved vehicles had risen by 18% year-on-year to December 2021. The report forecasts growth continuing in 2022, albeit at a much slower rate of 3.6%, before the line graph tips downwards once more in 2023.

This price spike is, like many consumer pricing moves of late, attributed to supply chain issues caused by the pandemic.

Largely, it’s linked to the slow-down in the new car market caused by the shortage of semiconductor chips used in vehicle manufacturing. The Moody’s Analytics report also highlights increased demand for vehicles for hitting the holiday road post-lockdown as a potential force driving up car costs.

It’s predicted that this confluence of factors will slowly shift back to pre-pandemic levels over the next year or so. But for now, it leaves car owners and potential buyers in a market where well-worn vehicles are worth considerably more than you might expect.

Should I increase car insurance cover on my used car?  

Whether you’ve just bought a car or are holding onto your trusty mechanical stead, you might be wondering where car insurance fits into this. It really depends on the type of insurance you hold and what your car is valued at right now.

For those with third party property insurance – which only covers costs for damages you might inflict on other people’s cars or property – it doesn’t mean a great deal. This is because your own wheels aren’t covered under this kind of policy, so what they’re valued at is a moot point.

It could have more of an impact for drivers who hold comprehensive car insurance. When you take out a comprehensive policy (the insurance level that can cover repair or replacement costs for your own car), the insurance company lays out the value they are covering your wheels for. This could be set at what they deem to be the ‘market value’ of the car (aka what it would sell for at that time), or an amount you choose and both parties agree to.

In either case, if the value of your car has increased since you took out or renewed your insurance, you could effectively be underinsured. This means the pay-out you might get to replace or repair the car via an insurance claim may not be sufficient in the current market. This could leave you in a position where you can’t afford to buy a new vehicle (even if it’s secondhand).

So, what can you do? If you’re concerned about this situation, you can get in contact with your insurance company and request valuation changes. Remember: if you’re increasing what the car is covered for, it’s likely your premium will increase. Also, be aware that car prices may shift down as global demand and shipping issues change, so you may want to reevaluate again when you renew your policy. 

If your insurance provider isn’t willing to negotiate a change or you aren’t happy with the deal they’re offering, you can always consider switching providers. Check out the policies below for an idea of common comprehensive car insurance fees and features.

Compare comprehensive car insurance - rates updated daily

Search promoted car insurance below. Advertiser disclosure. Important information on terms, conditions and sub-limits.
  • Gold Comprehensive Car Insurance

    Monthly premiums
    Calendar icon
    Yes Costs Extra
    Choice of repairer
    tools icon
    Optional Extra
    Choice of excess
    coins icon
    $500 - $1,850
    Agreed or market value
    Car coin icon
    Agreed Or Market

    Available discounts

    • Online Discount Up To 15%
    Go to site
    Details
  • Comprehensive Car Insurance

    Monthly premiums
    Calendar icon
    Yes Costs Extra
    Choice of repairer
    tools icon
    No
    Choice of excess
    coins icon
    $800 - $2,000
    Agreed or market value
    Car coin icon
    Agreed

    Available discounts

    • No Claim Discount
    Go to site
    Details
  • Comprehensive Car Insurance

    Monthly premiums
    Calendar icon
    Yes
    Choice of repairer
    tools icon
    No
    Choice of excess
    coins icon
    $500 - $5,000
    Agreed or market value
    Car coin icon
    Agreed Or Market

    Available discounts

    • Pay As You Drive Cover With Pricing Tiers Available For Limited Kms.
    Go to site
    Details
  • Comprehensive Car Insurance

    Monthly premiums
    Calendar icon
    Yes
    Choice of repairer
    tools icon
    No
    Choice of excess
    coins icon
    $800 Flat Excess Fee
    Agreed or market value
    Car coin icon
    Agreed

    Available discounts

      Go to site
      Details
    • Comprehensive Car Insurance

      Monthly premiums
      Calendar icon
      Yes Costs Extra
      Choice of repairer
      tools icon
      Optional Extra
      Choice of excess
      coins icon
      $400 - $2,500
      Agreed or market value
      Car coin icon
      Agreed Or Market

      Available discounts

      • 20% Discount On Contents Insurance If Youi Car Insurance Also Held
      Go to site
      Details
    • Comprehensive Car Insurance

      Monthly premiums
      Calendar icon
      Yes Costs Extra
      Choice of repairer
      tools icon
      Optional Extra
      Choice of excess
      coins icon
      $400 - $1,850 (varies By State)
      Agreed or market value
      Car coin icon
      Agreed Or Market

      Available discounts

      • No Claim Discount
      Go to site
      Details

    * Terms, conditions, exclusions, limits and sub-limits may apply to any of the insurance products shown on the Mozo website. These terms, conditions, exclusions, limits and sub-limits could affect the level of benefits and cover available under any of the insurance products shown on the Mozo website. Please refer to the relevant Product Disclosure Statement and the Target Market Determination on the provider's website for further information before making any decisions about an insurance product.

    ^See information about the Mozo Experts Choice Car Insurance Awards