The Difference between Retail, Market and Trade Value

The Difference between Retail, Trade and Market Value of a Vehicle When it comes to car insurance, we can sometimes feel thrown by the lingo and terminology that is used in policy contracts and by consultants. To ensure that you get the most value from your car insurance policy, it is important to understand the difference between the retail, trade and market value of a vehicle.

Buying a car and taking out an insurance policy requires long-term strategic thinking which can ultimately save you from future financial challenges. Most often and contrary to popular belief, the cheaper option is not always the one that allows for sustainable affordability. When looking at replacing your vehicle or buying your first car, it is important to consider a variety of factors which include:     

Does the vehicle have a high resale value?

Can I afford my monthly vehicle and insurance payments?

Which insurance option will yield more benefits if anything happens to my car?

Is the brand of vehicle a prime high jacking target?

Does my car have a high safety rating?

When considering a new or replacement car, the process of asking the above questions is imperative as each outcome will affect your insurance premium. MiWay understands that insurance is a based on decisions that meet a variety of personal needs which is why they offer a variety of car insurance options. These options are then broken down to offer an assortment of alternatives that can be selected by the consumer. In order for insurance companies to pay out a claim, it is imperative that consumers tick the appropriate options. These may include loss or damage caused to or by:     

Varying degrees of traffic collisions, Theft, high jacking, attempted theft or attempted high jacking, Fire or explosion, Earthquakes, storms, hail, flooding or snow, Window glass.

Car insurance heavily relies on the choices and decisions of the consumer which is why it is important to understand the fine print. If you’re feeling unsure about the difference between retail, trade and market value of a vehicle, read up on this comprehensive guide.

Retail Value Retail value is the amount that you would purchase the car for, including the mark up. If you had to insure your vehicle, it would be insured with the value closest to the replacement cost. Although it is the more expensive option, it has a large number of benefits if anything had to happen to your car. It is also important to remember that the retail value of your vehicle decreases on an annual basis. For example: If you bought a car for R250 000 and the car depreciates, it would be worth R200 000 over a period of one year, assuming that the car depreciates by an annual rate of 20 percent. If your car was stolen or wrecked in an accident, your insurance company would honour the claim according to the value of your car taken in that year which would be R200 000.

Market Value Market value is the average between the vehicle’s retail and trade values. It is important to take note of the fact that although you are paying less for your insurance, you are also covered for a substantially lower amount.

Trade Value If you choose to insure your car for its trade value, it would be covered for the value a dealer would pay for your vehicle. You would ultimately pay a lower insurance premium but would also be covered for less. If your vehicle were to be stolen or written-off, your valid claim would be honoured with a marginally lower amount of money due to depreciation.

To get the best value out of your insurance policy, it is imperative that you understand the difference between retail, trade and market value of a vehicle. By understanding these insurance options, you will be able to make informed decisions when it comes to evening out your car insurance policy.

Also have a look at this new MiWay video and learn the 4 Reasons You Need Car Insurance.

Sources 1. http://www.edmunds.com/car-buying/pricing-basics-for-used-car-buying.html