Bought a Car for a Steal? What’s Better: Market or Agreed Value?

Your ability to haggle might not always work to your advantage. Sure, you’ve talked a car seller down from their ridiculous prices and saved yourself a heck of a lot of cash in the process, but now you have to pay for car insurance. If you don’t pick the right company and the best valuation method, you’ll find that your ability to lowball becomes a thorn in your backside.

Like anything else that you open your wallet for, the best way to know you’re getting a deal is to compare the market and see what’s out there.

Whichever policy you opt for in the end, the worst thing you could do is undervalue your car. Here’s the best way to insure your car for enough to avoid having to write your own cheque in the event of an accident.

Which Value Should Your Quote Take into Account?

Basically, you can get an insurance quote for two different values. The market value of your vehicle is the widely recognised value for that particular make and model year. The agreed value was what you actually paid after you used your amazing bargaining skills to wear down the seller until they had no other choice but to admit your superiority and accept defeat.

The problem lies in the fact that if you get an insurance quote for a vehicle’s market value, your insurer will also figure for depreciation. Market values decrease as time goes on, meaning that insurers won’t pay as much to replace vehicles or help you fix them when you make claims. On the other hand, these lower market values usually also come hand-in-hand with lower premiums. The question you have to ask yourself with market value is whether you feel lucky enough to avoid getting into an accident that totals your car. If you do, your maximum claim payout might not be enough to replace your vehicle and you’ll be a sad little driver.

Making an insurance deal based on your agreed vehicle value ties your insurer to that specific number. Now you may be wondering why that’s a good thing if you earned yourself a bargain price, but think about the future. Market values depreciate on a yearly basis, and regardless of how enthusiastic you are about the turbokit and spoiler your seller threw in, your insurer won’t care about paying to replace them because they’re not market standards. Agreed value insurance policies cost more because their premiums are higher, but they’re definitely worth it when you wreck.

Finding a Clear Answer

If you’re still confused by which valuation is the best for your new insurance policy, just remember that you have to take it on a case-by-case basis. For instance, the lower-payout market value policies might be fine for drivers who never get into accidents and want to save some money on their premiums. Of course, that kind of thinking still doesn’t account for thefts and accidents caused by other drivers.

Another important factor is when you get into the accident. If you decided to celebrate your new car purchase with a few brews too many and had a smashup on the same day, the current market value might be enough to replace the vehicle, although you might want to reevaluate some of your priorities. Market value can be a good option if the car hasn’t depreciated that much between the time when it was a new model and when you bought it.

You also may have picked up a jalopy for a younger relative or something like that. If the car was already a few years old by the time you purchased it, you won’t really see that much of a difference in policy valuation types. You may love your new beater, but the fact of the matter is that it’s not worth that much, so replacing it won’t represent as big of an expense.

Not All Policies Are the Same

In the end, it’s important to shop around. Although each car insurer will offer different policy details for different valuations, separate insurers will also provide different payouts and premiums for similarly valued vehicles. You may think that this is obvious already, but unless you compare car insurance online, you may be missing out on the benefit of pegging one insurer up against another.

You fought a hard battle to get a good price in the first place, so don’t give up your gains by choosing the wrong policy provider!