Running for cover from car insurance

So, you’ve decided that the clouds of recession have parted sufficiently for you to get back into the car market in 2015. Congratulations, and welcome to the 110,000 club – at least that’s the current estimate for the number of people who will go out and buy a new car next year. That’ll make it the healthiest market since 2008, and closer still to the Irish motor trade’s estimated 130,000 unit sales level that would make for a sustainable market.

Now then, how about saving some money. Last week we took you through the ins and outs of financing a car and how best to approach the new deals on offer. Of course, our advice is geared to saving you money, but the unpalatable fact for the car industry is that the best thing to do when it comes to sheer value is to simply not buy a new car.

Falling value

Sorry, but it’s true.

Depreciation

is the single biggest

expense

when it comes to buying a car, and the fact is that in the first three years of their lives, cars will shed on average 50 per cent of their value. Admittedly, that’s not true for all cars, but it’s still a huge chunk of money to be, effectively, throwing away.

The old advice of buying at three years' old and selling at five still holds true, nowadays more than ever with cars having generally become so much more reliable. Indeed, do that with a Hyundai or Kia and you won't even be outside the original manufacturer's warranty.

Don't just take my word for it either. James Ruppert is a veteran motoring writer and an expert on buying second hand, and his advice is that "obviously the biggest expense involved in owning a car and the most overlooked one is depreciation. So please don't buy new unless you plan on keeping the thing for 15 years".

Traditionally in Ireland, of course, there has also been the hugely significant cost of insurance. For a long time, we all got screwed to the floor with car insurance, not helped by having to pay various levies to bail out failed insurers over the years, or by the once-disastrous safety and accident record of Irish roads and Irish motorists.

Thankfully that has abated somewhat, and with improving road safety stats, and greater competition in the insurance market, premiums have come down. The €250 fully comp quote is these days a reality, even if it's only so for a tiny selection of motorists. Still, there are dark clouds on the horizon.

According to journalist Paul Healy, news and road tests editor of completecar.ie, Irish drivers are likely to see their premiums rise by as much as 10 per cent over the next year, and that's on top of an average 4.4 per cent increase seen since last year.

Why? Several excuses have been trotted out, from the averaging out of premiums following the European court’s decision that discounts could no longer be offered to female drivers on the basis of gender, to the fact insurers are still trying to recoup massive losses from non- motoring-related claims, such as storm and flooding damage.

But the simple fact is, as Healy puts it, “the cost of claims are going up, so the cost of premiums has to go up too. Whoever, or whatever, is to blame for the premium increases it is clear that the motorist will be the one left to foot the bill, with the best advice being to shop around and play insurers off against each other. Car insurance may be a grudge purchase in that you legally have to have it but the competitive market can still be used to your advantage.”

Smaller engines

Shopping around is certainly the best advice when it comes to insurance, and you can knock several hundred euro off your quote, especially if it’s a renewal. Although it’ll never be admitted on the record, insurers regularly pad your renewal by a couple of hundred simply because they count on consumer laziness – most people will just assume that it’s a fair quote, sign the form and be fleeced by their inattention. A quick phone call is all it will take avoid that.

For younger drivers, the key is simply to stick to smaller engined cars – 1.0-litres is all you're realistically going to get covered on so it's a Micra for you, young 'un, and don't start adding spoilers and wings either. As Dominic Finlay from Liberty Insurance told us, "modifications which increase the performance of your vehicle are likely to increase the insurance premium. By avoiding changes such as engine modifications or a lowered suspension, you can keep the price of your insurance down. Of course, not all modifications will increase your insurance premium, but you must tell your insurer before you go ahead with any modifications."

Finally, there's the vexed subject of motor tax. Now, since the changeover of motor tax rules in 2008, when everything switched from being based on cubic capacity to CO2 emissions, it's probably fair to say that we've become obsessed with motor tax. Anecdotally, car dealers have told us that even the switch from Band A to Band B tax, a cost of only €70 a year, can be a deal breaker on a car sale. Frankly, this is ridiculous.

Now, if you’re shopping in the pre-2008 market, fair enough – motor tax on a relatively humble family saloon can run you more than €800 a year in that case, so you do need to take the tax band into account. It’s really about time something was done to undo the inequity of drivers, frequently those who can least afford it, paying vastly higher motor tax rates for older vehicles, but the Government seems complacently content to simply let vehicle age wash the problem out of the system.

Dealer discounts

For the vast majority of new cars on sale though, the fact is that they will fall into either Band A or B, so the most you’re going to have to lay out for a disc every year is €280. This gives one an opportunity to strike. If other, more heedless, consumers are focusing on the Band A models, that means that keener deals are around and about on cars in Bands B and C (and Band C cars are still only €390 a year to tax). So, use this knowledge wisely and grab yourself a sharper deal on the car that no-one else wants.

Finally, a word on those dealer discounts. Don’t go in expecting miracles. Yes, it’s true, the motor trade will always give you a good dose of the poor mouth when you start talking about discounts, but it’s also worth being realistic. Most car dealers operate on a thin margin on new cars, about 8 per cent, so place your expectations of price reductions within that corridor.

And don't forget the good old pre-reg bargain. While car makers and sellers will have to resort less to registering cars to themselves to meet monthly targets in 2015, as there will be more genuine punters about, the practice is still a significant one, and could in some months represent as much as a third of new registrations.

While it’s a silly move for the industry, which will have an inevitable effect on second-hand prices, pre-reg cars can still represent a terrific bargain on the day for you, so snap them up while they’re there and don’d be worried that your name isn’t the first one in the log book