(StatePoint) If you’re in the market for a new or used car… you’re not in luck. According to CarGurus, the average price of a used car in mid-May of 2021 was over $25,000, nearly $5,000 more than the previous year. The inflated prices are largely due to a global automotive microchip shortage that affected the production of new cars, in turn creating higher demand for used vehicles.
In addition to paying more for a car that is harder to find, your vehicle will almost always depreciate the minute it’s driven off the lot. Plus, should your car be damaged in a crash, you might not even receive enough money from your insurance company to replace it, unless you have the right coverage.
Given the current issues with pricing and demand, it’s especially important to take steps to maintain as much of your vehicle’s value as possible and protect yourself against the inevitable depreciation. Here are four tips that can help:
1. Buy a vehicle with a high resale value. A study from Fleet Financials found that within the same year, mid-size sedans depreciated 17.5% while compact crossovers only depreciated 12%.
2. Take care of your car. Cars in better condition with fewer miles, under 100,000 according to CarsDirect, will re-sell at higher rates. Stay on top of service and maintenance, address any issues as soon as possible and avoid unnecessary modifications such as window lettering.
3. Opt for used rather than new. According to Carfax.com, the average car will be worth just 40% of its purchase price after five years. By choosing a five-year-old vehicle rather than a brand-new one, customers can save significantly.
4. Upgrade your auto insurance to cover what it would cost to replace your car. In the event of an accident, standard insurance typically covers the amount your vehicle is currently worth, not the amount it would cost you to buy another one. However, certain auto endorsements, such as Auto Security from Erie Insurance, cover the difference between current worth and the amount you owe on your vehicle. For example, if you’ve owned your new or used car less than two years and it gets totaled, Auto Security will reimburse you the cost to replace it with the newest model year. If there’s an accident that’s not a total loss, Erie Insurance will pay to repair the vehicle without a deduction for depreciation.
“Being involved in an auto accident can be incredibly stressful,” said Jon Bloom, vice president of personal auto at Erie Insurance. “Should your car be damaged, our Auto Security endorsement can help give you peace of mind by covering more than a standard policy would.”
To learn more, or talk with an insurance agent, visit erieinsurance.com.
Any vehicle will lose value over time, but making informed decisions about your car and its insurance policy can save you money in the long run.
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