Solving the used car insurance conundrum can be quite complicated with all the kinds of car insurance available nowadays.

This is especially true with used car sales soaring due to parts shortages and economics, driving demand for niche insurance solutions such as mechanical warranty, service plans and credit shortfall cover.

Used car sales volumes and prices have taken off as the pandemic disrupted supply chains and caused shortages in critical auto components such as semiconductors, resulting in a shortage of new vehicles.

The devastating floods in KZN also had a major impact as leading auto-manufacturers lost their new vehicle stock to flood damage, while the Russia-Ukraine war continues to affect the global supply of new vehicles.

Therefore, South Africans are increasingly turning to the used car market, with 2.31 used vehicles sold for every new vehicle at the end of 2021, with 33% less than two years old according to a TransUnion report. 

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Insurance for a used car

Now that everybody is buying used cars, consumers are increasingly taking out mechanical warranty insurance, service and maintenance plans and credit shortfall insurance to prevent being out of pocket when any major parts failures are no longer covered by the manufacturer or when the car needs a service.  

“When buying a used vehicle, even if relatively new, there are important risk and insurance considerations to look at, not only in terms of insuring your vehicle for the correct replacement value in the event of theft or accident, but also protecting your pocket against the unexpected costs of a major mechanical component breakdown, as well as managing your routine servicing costs,” says Carl Moodley, chief underwriting and claims officer at GENRIC Insurance Company Limited.

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How to choose

GENRIC has these tips for insuring your used car:

• Credit shortfall insurance makes provision for the residual or balloon payment on your car should it be stolen or written off, as normal car insurance only pays out the retail or market value at the time of the loss, which may result in you still owing money to the bank.
• The cost of insuring your vehicle against theft and accidents is determined by many aspects and it is important to be honest about all relevant information the insurer requires, including any extras, as well as who the regular driver is to avoid having a claim declined or a claim pay-out being less than expected.
• Always insure your vehicle for its ‘retail value’, the price a dealer will sell a used vehicle to you, as opposed to the ‘market value’, which is the value you could expect to sell the vehicle for and usually less than retail value.
• Get cover for major mechanical failures as a used car does not have the basic manufacturer warranty which would cover any mechanical and electrical parts for repair or replacement and leave you at risk of costly ‘out of manufacturer warranty’ breakdowns.
• Service and maintenance insurance provides cover for the scheduled service and maintenance your vehicle will need at certain mileage or time intervals. Depending on the option you choose and the make of your vehicle, your service plan will typically cover the general service components such as air filter, engine and transmission oil, brake fluid, coolant, fuel and oil filters, pollen filter, spark plugs, sump wash and related labour, subject to the policy limits.