Retail, market or trade-in value: how does it affect your car insurance?

The value of your car is important when it comes to insurance premiums and, if you're like most car owners, you know how important it is to have cover for those unexpected mishaps on the road.

But how much should you insure your car for, and should you insure it for its retail, market or trade-in value? 

Auto & General Insurance sheds light on how your car's value can shape your insurance decisions and financial wellbeing.

 What it all means: retail, market and trade-in value

1. The retail value of your car represents the price a dealer will sell it to a customer. This value is the highest of the three options, including costs and profit margins for the car dealership. This type of vehicle is usually in mint condition and often includes vehicle warranties. 
2. The market value, also known as the fair market value, is the current value for a specific make, model and condition of the vehicle in the open market. The market value of a car takes into account factors like the car’s age, mileage, condition and demand. Things like sales data for similar vehicles determine this value. 
3. The trade-in value is the amount of money a dealership or buyer is willing to offer you for your car when you trade it in for another vehicle. Typically, this is the lowest value of the three options because the car dealer still needs to make a profit when they resell the car. The trade-in value takes into account factors like the condition of the car and mileage. It’s often a good option when you’re looking to upgrade your car. 

Is it better to insure for market, retail or trade-in value?

If you choose to insure your car for its retail value, you will pay a higher monthly premium. But, if something happens to your vehicle, you will receive a higher amount back in a settlement or a replacement vehicle of a similar make and model. 

If you choose to insure your car for its market value, your monthly premium is usually lower. The insurer will consider things like mileage, condition and service history before providing you with a market value.

A car insurance company will standardise how they value a car to make it easier for people to determine its worth. 

Trade-in value is often used by dealerships when discounting the purchase of a new vehicle or trading in for a car of equivalent value. The monthly premium is typically less than retail and market value as mileage, condition and service history are considered.

What do you choose based on the value of your car?

The retail value may be the best option if you want to seamlessly return to driving the same car as before with minimal fuss. If you don't mind getting a car that might not be the same make and model but operates as well as your previous one, the market value might be a better choice.

Auto & General Insurance offers another option. If your car is written off or stolen, BetterCar Value will pay out for the retail, market or trade-in value. If your car is written off, you will receive the retail value of your vehicle or an equivalent model that's one year newer. If a newer model hasn't been released yet, BetterCar Value will pay you 15% more than your previous car’s retail value. 

If your car is on finance or paid for by a loan, it is wise to consider the repayment details when taking out car insurance. For example, a high fixed interest rate might mean you owe money on your vehicle loan, and if you no longer have the car, there may be a shortfall owed to the lender. 

Comprehensive car insurance covers you for accidents, damages, theft and any third-party claims against you. It's a great option for customers with new, financed cars.

If you’ve enhanced your car with a new sound system or tow bar, you’ll want to ensure your insurance covers the upgrades. If not, you’ll have to forgo these additions if the insurer replaces or pays out for your vehicle. 

This article was sponsored by Auto & General.