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Why do my car insurance premiums keep going up?

Why Do My Car Insurance Premiums Go Up (While The Value Of My Car Goes Down) Each Year?

We all know that your car begins to be worth less the moment you pick it up from the dealership. Unless you have a very special kind of car (a classic collector’s car for example), your vehicle will consistently lose value over time as it gets older, the mileage goes up, and the condition deteriorates. This is called depreciation: the decrease in monetary value of an asset.

So if your car is worth less to resell, why do you need to continue paying more for car insurance? Let us explain.

Complex Technology In Modern Cars

A large part of increased premiums is the growing cost of repairing vehicles. Cars are now more expensive to repair than ever due to the amount of complex technology built into modern vehicles, from sensors to smart computer components. These are all great when you’re using your car day-to-day, but they do make the mechanic’s job much harder when they have to put your car together again after an accident!

Hard-To-Find Parts For Older Cars

On the other hand, much older vehicles are also very expensive to repair in the event of an accident or breakdown. This is because the older a car is, the more difficult it can be to source parts for it. Manufacturers don’t continue to produce parts for all their cars forever, and so if your car hasn’t been sold new for a long time it may be difficult for a mechanic to easily find and purchase the part they need to fix it. This means it becomes more expensive for you.

Insurance companies build the cost of both hard-to-find or hard-to-fix rarer parts, and the additional labour that mechanics and panel beaters often have to do, into their premiums.

Older Cars Are Less Safe Than Newer Ones

The age of your car also affects your risk while driving. Even if you know you’re a better driver than your friend who has a flashy new model, the insurance companies are looking at the tech available to you rather than your driving skill. Older cars don’t have the same safety technology – like automatic breaking, parking sensors, and electronic stability control – so insurers will charge you more to drive a car that is considered less safe when on the road than a brand-new vehicle with all the safety tech.

Other Factors To Consider

It’s more than just your car itself that affects the price you pay. Car insurance premiums are calculated based on a number of factors beyond your car’s market value. When calculating your insurance cost, your insurer will also take into account information such as your driving history, your age, and your location.

Unfortunately, you’re not in a position to change most of these factors. For example, an increase in crime in your area, particularly car theft, can cause your insurance company to class your location as more dangerous and therefore raise your premium. Even if you haven’t suffered any problems relating to damage or crime, if there is an increase in claims in your area then the insurer will adjust rates accordingly.

Sally Writes 16 Nov 2020