By

John Davey

Updated

July 14, 2023

Edited By

Fausto Bucheli Jr

Discover how the resale value of your car can impact the cost of your car insurance. Explore the top car models with high resale value, understand depreciation’s influence on insurance premiums, and learn about zero depreciation add-ons. This consumer guide empowers licensed drivers aged 20-60 to make informed decisions about¬†car insurance.

new car showroom
image credit: Esmihel Muhammad

Introduction

Car insurance is a crucial aspect of owning a vehicle, providing financial protection in case of accidents, theft, or damage. However, many drivers are unaware of how the resale value of their car can significantly affect their insurance premiums. In this comprehensive consumer guide, we will delve into the connection between resale value and car insurance costs. By exploring data from reputable sources, such as articles on car resale value and depreciation, we will equip licensed drivers aged 20-60 with the knowledge they need to navigate the complexities of car insurance.

The Importance of Resale Value in Car Insurance

Understanding the relationship between your car’s resale value and your insurance premiums is essential for managing the cost of coverage effectively. As highlighted in the article “How Depreciation Can Affect Your Auto Insurance Premiums,” insurance companies consider the value of your vehicle when determining premiums. A higher resale value implies a potentially higher payout in the event of a total loss, leading to increased insurance costs. On the other hand, a car with better resale value can result in lower premiums over time.

Top 10 Car Models with the Best Resale Value in 2023

To assist you in making informed decisions about your vehicle purchase, it is vital to consider the resale value of different car models. According to the article These 10 Used Cars Have Held Their Value the Most, the Jeep Wrangler, Jeep Wrangler Unlimited, and Porsche 911 have demonstrated the least depreciation over the last five years. By opting for car models that hold their value well, you can potentially enjoy lower insurance costs throughout your ownership.

Top 10 Cars That Hold Their Value The Most for 2023

RankModelAverage 5-Year Depreciation
1Jeep Wrangler-7.3%
2Jeep Wrangler Unlimited-8.7%
3Porsche 911-14.6%
4Toyota Tacoma-14.9%
5Honda Civic-16.3%
6Subaru BRZ-18.2%
7Ford Mustang-19.4%
8Toyota Corolla-19.8%
9Nissan Versa-19.9%
10Chevrolet Camaro-20.2%
source: CNBC These 10 used cars have held their value the most
https://www.cnbc.com/2022/11/11/these-10-used-cars-have-held-their-value-the-most.html
jeep wrangler
image credit: Styves Exantus

Models with the Highest Rate of Return after Five Years

To further explore the impact of resale value on insurance costs, let’s analyze the car models that offer the highest rate of return after five years of ownership. Certain car models, such as the Porsche 911 and Toyota RAV4 Hybrid, have appreciated in value over the last three years. This appreciation can positively influence insurance premiums, as it indicates a higher value for potential payouts in case of a total loss.

RankModel5 Year Residual Value
1Nissan Frontier88.55%
2Honda Accord88.00%
3Toyota Tacoma87.58%
4Subaru Forester87.09%
5Ford F-250 Super Duty87.00%
6Volkswagen Tiguan87.00%
7Ford F-350 Super Duty86.95%
8Ford F-15086.75%
9Mazda 386.13%
10Honda Civic86.00%
11Kia Rio86.00%
12Honda Pilot85.95%
13Mazda MX-5 Miata85.80%
14Toyota Highlander85.77%
15GMC Canyon85.33%
16Nissan Versa85.03%
17Toyota 4Runner85.00%
18Toyota Prius85.00%
19GMC Sierra 150084.80%
20Subaru Legacy84.73%
21Mitsubishi Mirage84.71%
22Nissan Sentra84.30%
23Volkswagen Jetta84.05%
24Chevrolet Camaro84.00%
25Chevrolet Colorado84.00%
26Chevrolet Corvette84.00%
27Chevrolet Express84.00%
28Dodge Charger84.00%
29Ram 250084.00%
30Subaru Crosstrek84.00%
31Toyota Sequoia83.74%
32Honda Odyssey83.62%
33Chevrolet Malibu83.40%
34Ford F-450 Super Duty83.25%
35Dodge Durango83.23%
36Subaru Outback83.23%
37Honda CR-V83.00%
38Subaru Impreza83.00%
39Toyota Camry83.00%
40Mazda CX-582.69%
41MINI Clubman82.22%
42Chevrolet Traverse82.15%
43Kia Sportage82.03%
44Toyota Sienna82.00%
45Ford Transit Connect81.91%
46GMC Sierra 3500HD81.65%
47Ram 350081.55%
48Ram Promaster Cargo Van81.55%
49Toyota Tundra81.35%
50GMC Terrain81.00%
51Hyundai Tucson81.00%
52Kia Forte81.00%
53Kia Soul81.00%
54Toyota Corolla81.00%
55Toyota RAV481.00%
56Nissan Rogue80.98%
57Hyundai Sonata80.19%
58Chevrolet Silverado 150080.00%
59Honda HR-V80.00%
60Hyundai Elantra80.00%
61Jeep Compass79.21%
62Hyundai Accent79.00%
63Jeep Wrangler78.91%
64Ford Edge78.79%
65Honda Ridgeline78.65%
66Mazda CX-978.54%
67Toyota Avalon78.50%
68Chevrolet Silverado 3500HD78.40%
69Mitsubishi Outlander Sport78.36%
70GMC Acadia78.30%
71Ford Mustang78.00%
72Mitsubishi Outlander78.00%
73Nissan Titan XD77.64%
74Chevrolet Silverado 2500HD77.36%
75Ford Explorer77.30%
76Nissan GT-R77.00%
77Chevrolet Trax76.90%
78Chevrolet Equinox76.50%
79Nissan Murano76.29%
80Hyundai Santa Fe76.25%
81Dodge Challenger76.00%
82Ram 150075.60%
83GMC Yukon75.31%
84Nissan Maxima75.00%
85Chevrolet Spark74.62%
86Buick Encore74.26%
87Chrysler 30074.06%
88Nissan Titan74.04%
89Nissan Altima73.90%
90Ford Expedition73.35%
91Buick Enclave73.21%
92Chevrolet Tahoe73.12%
93Ford Escape73.00%
94Jeep Grand Cherokee72.70%
95Nissan LEAF72.55%
96Kia Sorento72.48%
97Jeep Cherokee72.28%
98Chevrolet Suburban71.86%
99GMC Sierra 2500HD71.30%
100Nissan Armada68.80%
101GMC Yukon XL68.38%
source: Caredge.com Cars with the Best Resale Value
https://caredge.com/ranks/depreciation

Automotive Brands with the Worst Rate of Return after Seven Years

At the Manufacturer brand level, the following brands have demonstrated the poorest rate of return over seven years.

RankBrand7 Year Resale Value
17Buick54.32%
16Chrysler55.82%
15Ford61.23%
14Ram61.63%
13Jeep63.05%
12Mitsubishi63.09%
11GMC63.66%
10Dodge65.21%
9Nissan65.26%
8Chevrolet66.49%
7Hyundai67.31%
6Kia69.19%
5Volkswagen70.48%
4Mazda72.24%
3Toyota72.54%
2Subaru72.66%
1Honda73.29%
source: Caredge Cars with the Best Resale Value
https://caredge.com/ranks/depreciation

How Depreciation Affects Your Auto Insurance Premiums

Understanding the impact of depreciation on your car’s value is essential when considering how it affects your insurance premiums. As mentioned earlier, cars generally depreciate in value over time, and the rate of depreciation can vary based on factors such as demand, economic trends, and current events. Let’s explore how depreciation can influence your insurance premiums and what steps you can take to protect yourself.

Insurance Premiums and Vehicle Value

When it comes to insurance premiums, certain areas of coverage are directly correlated to your car’s value. These areas include¬†collision coverage¬†and¬†comprehensive coverage, which protect your vehicle against damages caused by accidents, theft, or other covered events. As your car’s value decreases due to depreciation, the potential payout by the insurance company in case of a total loss also decreases. Consequently, insurance rates for collision and comprehensive coverage should gradually reduce as your car depreciates.

However, many consumers are unaware of this relationship and may continue paying the same premium rate year after year, despite their car’s diminished value. Insurance companies often fail to adjust the rates automatically, resulting in potentially overpaying for coverage. To address this issue, it’s crucial to be proactive and ask your insurance provider about lower rates that account for depreciation if you plan to own the car for an extended period.

Replacement Insurance

Another way to protect yourself from the impact of depreciation is by purchasing replacement insurance. This type of coverage ensures that if your car is totaled, the insurance company will pay out the vehicle’s original value when purchased, rather than its depreciated value at the time of the accident. By opting for replacement insurance, you can bridge the gap between your car’s current value and the amount needed to replace it with a similar vehicle. This coverage can be particularly beneficial for new car owners who face the steepest depreciation in the initial years of ownership.

Buying Used Cars

If you’re concerned about depreciation’s impact on insurance premiums, buying a used car can be a smart choice. As mentioned earlier, the most rapid period of depreciation occurs immediately after a new vehicle’s purchase and in the first three years of ownership. By purchasing a used car, you avoid shouldering the heaviest loss in value experienced by the original owner. Used cars typically have a lower market value, leading to potentially lower insurance premiums.

used car dealership
image credit: Jim Witkowski

The Role of Zero Depreciation Car Insurance Add-on

Understanding the concept of depreciation in car insurance is crucial for making informed decisions about your coverage. One way to mitigate the impact of depreciation is by opting for a Zero Depreciation Car Insurance Add-on. Let’s explore what this add-on entails and how it can help protect your financial interests in case of a claim.

What is Zero Depreciation Car Insurance Add-on?

The Zero Depreciation Car Insurance Add-on is an optional coverage available with Comprehensive car insurance policies. When you have this add-on, the insurance company considers the depreciation of your car as zero while calculating the claim amount. This means that in the event of damage or a total loss, you will receive a higher claim payout compared to a standard policy that accounts for depreciation.

How is Car Depreciation Calculated?

Car depreciation is calculated based on factors such as the car’s age and its Insured Declared Value (IDV). The IDV represents the market value of the vehicle for a specific policy period. The insurance company takes into account various car parts, including tires, tubes, nylon parts, batteries, airbags, fibreglass, and paint, to calculate the depreciation. However, glass parts are typically not considered for depreciation calculations.

Different Rates of Depreciation for Car Parts:

The rate of depreciation for car parts varies depending on the manufacturing year of the vehicle. This differentiation helps determine the claim amount in case a specific part is damaged. Generally, the depreciation rate for rubber, nylon, plastic, and battery parts is around 50%. For fibreglass parts, the depreciation rate is typically 30%. When it comes to wooden parts, the depreciation is calculated based on the car’s age. Notably, there is usually no depreciation on glass parts if they are damaged.

Depreciation Remedy: Zero Depreciation Add-on

Depreciation can significantly reduce the claim amount, causing inconvenience when you need financial support the most. To counteract this, purchasing a Zero Depreciation Add-on is a practical solution. By including this add-on in your insurance policy, you can ensure that depreciation is not a factor when settling claims. It is essential to note that most insurance companies offer the Zero Depreciation Add-on for new cars during the first five years of ownership. After this period, the policyholder is responsible for bearing the cost of depreciation.

Impact of Not Having the Zero Depreciation Add-on:

If you do not have the Zero Depreciation Add-on with your Comprehensive car insurance policy, the claim amount will be reduced. This means you will have to bear higher out-of-pocket expenses for repairs or replacements, as the insurance company will factor in depreciation while settling the claim. The absence of the Zero Depreciation Add-on can lead to a significant financial burden during unforeseen events.

Difference Between Zero Depreciation Car Insurance and Normal Car Insurance:

The primary difference between Zero Depreciation Car Insurance and normal car insurance lies in how the claim amount is calculated. In a normal car insurance policy, depreciation is considered when determining the claim payout. However, with Zero Depreciation Car Insurance, depreciation is not factored in, resulting in a higher claim amount.

Understanding Car Insurance Depreciation Value:

Car insurance depreciation value refers to the monetary value associated with the depreciation of a vehicle over time. This value increases annually and directly affects the claim amount you receive from the insurance company. It is essential to be aware of this value as it influences your financial recovery in case of a claim.

Car Insurance Depreciation Calculator:

While there is no specific car insurance depreciation calculator available for policyholders, you can use an Insured Declared Value (IDV) calculator as a reference. An IDV calculator helps determine the actual value of the car in terms of insurance coverage, considering factors like the car’s age and condition. Although it does not provide an exact depreciation calculation, it aids in understanding the value of your car and its impact on your coverage.

Importance of Insured Declared Value (IDV):

Insured Declared Value (IDV) plays a vital role in car insurance, especially in the case of extreme damage or total loss. It represents the market value of the vehicle and determines the maximum claim amount that the insurance company will settle. Understanding the IDV is crucial for ensuring that your coverage aligns with your car’s value and financial needs.

Incorporating the Zero Depreciation Car Insurance Add-on can help protect your financial interests by eliminating the impact of depreciation on claim settlements. Depreciation, influenced by factors such as car age, affects the claim amount you receive from the insurance company. By being aware of these aspects and making informed decisions about your coverage, you can safeguard yourself against unnecessary financial burdens and ensure adequate protection for your car.

The Significance of Insured Declared Value (IDV) in Car Insurance

How to Recover Depreciation on Auto Insurance Claims

Filing a car insurance claim can be a complex process, and one of the common challenges that policyholders face is understanding how to recover depreciation on their claims. It is widely known that cars depreciate in value as soon as they are driven off the lot and over time. However, when it comes to filing an insurance claim, this depreciation can become a point of contention with the insurance company. So, how can you recover the depreciation on your auto insurance claim? Let’s explore the process.

Understanding Recoverable Depreciation

Depreciation in the context of auto insurance is often referred to as a diminished value claim. This type of claim allows you to seek compensation for the loss in value your car has suffered after being involved in an accident. If your car has undergone repairs but is still significantly less valuable as a result, you have the right to pursue compensation for this depreciation.

To initiate the process of recovering depreciation on your auto insurance claim, you will need to open a diminished value claim. This claim focuses on the difference between your car’s value before the accident and its value after the accident. If the accident was caused by another person’s negligence, you would file a claim against that driver’s insurance policy. However, if you believe that the accident itself has negatively impacted the market value of your car, you may also need to pursue a diminished value claim with the at-fault driver’s insurance company.

Types of Diminished Value Claims

  1. Immediate Diminished Value: This type of claim involves calculating the resale value immediately after your vehicle has been involved in an accident but before any repairs have been made. Since most vehicles undergo repairs following an accident, this claim is rarely used. However, it is still an option to consider in specific circumstances.
  2. Repair Related Diminished Value: If your mechanic provides insufficient or improper repairs or uses low-quality parts, you can initiate a claim for repair-related diminished value. This claim assumes that your vehicle cannot be restored to its initial condition. It is crucial, especially for luxury car owners, to ensure that the mechanic uses exact parts from the car’s manufacturer to replace any damages. The use of generic parts can significantly diminish the value of your vehicle.
  3. Inherent Diminished Value: This is the most common type of diminished value claim. It focuses on the market value of your car after it has been repaired following an accident. Even if the repairs are done excellently, the presence of an accident in your car’s history lowers its worth for potential buyers. In today’s market, where people often check accident history reports, inherent diminished value claims have significant implications.

Recovering depreciation on your auto insurance claim can help you recoup some of the financial losses associated with the diminished value of your vehicle. By understanding the different types of diminished value claims and their significance, you can navigate the process more effectively and seek fair compensation for the decrease in your car’s value caused by an accident.

Remember to consult with your insurance provider and gather the necessary evidence, such as repair records and market value assessments, to support your diminished value claim. This will strengthen your case and increase your chances of recovering the depreciation amount.

If you believe that your car’s value has decreased as a result of an accident, you have the right to pursue a diminished value claim. By understanding the nuances of the different types of diminished value claims and working closely with your insurance company, you can recover the depreciation amount and receive fair compensation for the diminished value of your vehicle.

Factors Affecting Resale Value and Insurance Premiums

Several factors impact both the resale value of your car and your insurance premiums. As discussed in the articles “These 10 Used Cars Have Held Their Value the Most” and “How Depreciation Can Affect Your Auto Insurance Premiums,” factors such as the make and model of your vehicle, age, kilometers driven, maintenance, and safety features influence both resale value and insurance premiums. By choosing a car with better resale value and considering these factors, you can potentially lower your insurance costs.

Tips for Maximizing Resale Value and Minimizing Insurance Costs

To maximize the resale value of your car and minimize insurance expenses, consider implementing the following tips:

  • Regularly maintain your vehicle and keep it in good condition to preserve its value.
  • Opt for car models known for their high resale value.
  • Install safety features and anti-theft devices to mitigate risks and potentially lower insurance premiums.
  • Consider bundling your car insurance with other insurance policies to access multi-policy discounts.
  • Review your coverage annually to ensure it aligns with your current needs and the value of your car.

Summary: Making Informed Decisions About Car Insurance

Understanding the connection between your car’s resale value and your insurance costs is vital for licensed drivers. By considering the best car models with high resale value, comprehending depreciation, and exploring zero depreciation add-ons, you can optimize your insurance coverage while minimizing costs. Remember to factor in the various elements that influence resale value and insurance premiums when making decisions about your coverage. By staying informed and proactive, you can protect your investment and ensure affordable and comprehensive car insurance coverage.

In conclusion, the resale value of your car significantly impacts the cost of your car insurance. By considering car models with high resale value, understanding depreciation and its effect on premiums, and exploring zero depreciation add-ons, you can make informed decisions that protect your investment and minimize insurance costs. With the knowledge gained from this comprehensive consumer guide, you can confidently navigate the complexities of car insurance and secure the coverage that best suits your needs. We’ve been helping divers find¬†the best cheap insurance, with the options you need to protect your property and family.