Why is Car Price Important for Buying & Insuring?

Car hunting isn’t always easy. When Saad decided to buy a new car, he had no idea what he wanted other than a reliable and affordable car. For one, there are just too many options to choose from. Most people are like Saad, they are open to considering multiple different cars at the beginning of their search; Then, narrowing down the options that match their preference and price range. Ideally, all car buyers should first decide how much they want to spend — that’s the car price plus the subsequent running costs.

As all savvy shoppers know, owning a car can be very expensive. First, there’s paying the car’s price itself. Next, there’s routine maintenance, filling gas, and buying car insurance. Without proper budgeting, the costs can really start piling up and break the bank eventually.
Here are a few things to consider when buying your next car; mainly, determining your car budget and understanding how the value of your car affects your insurance price.

How to buy a car on budget

According to Nerdwallet and Moneyadvice, buying a car can be a big mistake if you don’t keep a grasp on your budget. So, it’s a good idea to start your calculations to figure out the best way to fit a car purchase into your budget – use the 20/4/10 rule to find the right car budget for you.

What is the 20/4/10 rule of buying and financing a car?

The 20/4/10 rule is a general rule of thumb, that uses straightforward math to help car buyers figure out a sound budget. Grab a calculator and let’s get to work!

• Firstly, you should be able to put down 20% of the car’s price as a down payment.
• Secondly, keep the length of your car loan to 4 years maximum
• Finally, all your car expenses gas, maintenance, and car insurance should come in at roughly 10% of your income.

To make sure your car budget is a line, research car price guides and check car insurance prices online on a free comparison website.

Why is it important to factor in insurance costs?

In a nutshell, car insurance companies pay attention to how much each car costs as much as you do!

Should anything happen to your car, your insurance company shall be liable for reimbursing you. So, when you take out a comprehensive insurance policy, insurers ask you to declare the insured value – or the price of your car.

They use this information to work out how much to charge you for a policy. In general, the price of your car can affect your car insurance rates. However, the cost of your car insurance depends on other factors like the car’s make and model and personal information including your age, location, and driving record.

Why do insurance companies ask you to determine the insured value

The price of your car matters for 3 basic purposes:

• Firstly, to determine how much your car repairs usually cost.
• Secondly, to find out how much your car’s spare parts cost.
• Also, to determine the percentage at which an insurer can declare a car an economical total loss.
• Finally, to calculate the value of your car after a technical total loss.

Usually, the lower the estimated value of your car is, the lower your insurance rates will be – Nonetheless, a less expensive car to purchase may not necessarily be less expensive to insure. So if you are trying to save on car insurance, be sure to check out our car buying tips from insurance experts.

What’s my car value?

The insured value refers to the price you think your car could sell for in the market if you have decided to trade or sell a car. In Saudi Arabia, policyholders are permitted to determine their cars’ value on their own — It’s almost like putting a fair price tag on a used car before trying to sell it. Obviously, car value varies depending on the car and its model, mileage, and condition.

Luckily, there are many ways to help you determine your car’s value accurately.

Tips for determining the insured value fairly

If your car is in excellent condition:

• To get a clear understanding of how much your car is worth, you can check and compare car price guides or used car websites in Saudi Arabia.
• You can also figure out how much your car is worth today by calculating the car depreciation rate. For example, you can simply estimate how much value your car has lost, by deducting the depreciation percentage from its original purchase price.

Mind the condition of your car when trying to put a price on it. If the car has been in a few accidents in the past or has some dents and scratches. Then, you must be realistic with its actual value.

• You can also use the number you get after a car appraisal from a car exhibition sheikh in Saudi.

Is it better to undervalue or overvalue my car?

On one hand, undervaluing your car means lower insurance rates, but it also means getting lower compensation when your car is totaled or stolen.

On the other, overvaluing your car could lead to higher car insurance rates. Also, in the event of a total loss, the insurance company has the right to compensate you the agreed insured value or the car’s market value, whichever is less, unless otherwise stated in the policy table.

SAMA advises all car insurance policyholders to be realistic when insuring their cars.

The amount of coverage stated in the policy or the vehicle’s market value at the time of the accident, whichever is lower, represents the insurance company’s maximum liability for compensation. Make sure that you report the actual value of your vehicle to the company when insuring it, and at each renewal of insurance policy without addition or diminution because the insurance policy is a compensation policy not an enrichment one.

Keeping your car (value) in an excellent condition

If you’ve decided to make an important investment in your car, it’s important to keep it in mint condition. We recommend getting the optimum coverage to insure your valued car.

Here are some things that contribute to keeping the value of your car:

• Up-to-date maintenance & service
• The car’s popularity: brand, model, and even additional features 
• Having your car accidents and damage free
• Getting the right car insurance coverage

And, be careful of things that can diminish your car’s value quickly:

• General wear and tear
• Non-standard car modification or accessories
•  Damaged car parts
• Number of previous owners
• Number of accidents
• Annual Mileage

Compare, choose, and save big on car insurance!

All in all, the price you pay for a car can indeed impact your insurance rates. Typically, the more expensive the car, the higher the insurance premiums. This is because pricier cars often cost more to repair or replace in case of damage or theft. Insurance companies consider factors like the car’s make, model, year, safety features, and its market value when calculating premiums. Higher-priced cars generally have higher insurance rates due to the increased cost associated with potential repairs or replacements.

So, if you’re looking to factor insurance costs into your car buying decision, it’s smart to consider potential insurance costs for different cars. And hey, if you want to explore your options and find the best insurance rates that suit your car and budget, comparing car insurance offers online is a great idea. Take the opportunity to compare prices and coverage options tailored to your new car. It’s an easy way to ensure you’re getting the best deal and coverage that fits your needs. Start comparing car insurance offers online today to find the perfect match for your new wheels!