SIOUX FALLS, S.D. (KELO) — Shopping for a new or used vehicle came with a much higher price tag in 2021–and in the new year, experts believe prices won’t be coming down anytime soon.
This high-value market is making a car crash or insurance claim even more complex.
“The index showed that it’s up 42 percent from the previous year. The used car market was that much higher, but the new car market was also up 12 percent,” Autoland owner Brad Dumdie said.
With such a steep increase in prices, some may wonder if their insurance will cover the new cost of a replacement if they get in a crash.
“We always go by actual cash value at the time of loss. So regardless of fluctuations in the market, the market decides what the value of the vehicle is,” Farm Bureau Insurance Agent Nathan Lindeman said.
Lindeman says right now the industry is seeing much higher payments for totaled cars and trucks of all ages.
“We’re seeing a lot higher values on used cars,” Lindeman said.
“Even a lot of the older cars are bringing a lot more money than they used to bring, because that’s what’s affordable,” Dumdie said.
The sticker shock has some people trying to avoid the car shopping process altogether by making the car they do have last a little longer.
“We’re definitely seeing more people service or repair their older cars, that’s for sure. We’re also seeing an increase in prices there as well. Tires and cost of parts are going up,” Dumdie said.
It’s also taking more time to get replacement parts, which is stretching the limitation of some insurance rental car coverage for repairs.
“We’re going from an average of 3 to 5 days where someone needs a rental car vs. 7 to 20 days,” Lindeman said. “Most policies have limits on how much they’ll pay per accident.”
Lindeman says the increase cost of repairs and the higher cost of getting another vehicle has made continuing to drive a cosmetically damaged vehicle more common during the pandemic. But for many others, high prices or not, when it’s time to replace a vehicle, they’re just car shopping like usual.
“It has been very active, probably been busier than normal actually,” Dumdie said. “People have adjusted. Inflation is higher, gas is higher, groceries are higher and so are cars.”
While Dumdie says the higher market hasn’t decreased the demand for new and used cars, the shortage in supply is still his biggest concern. He says the supply of new and used cars is still very low as a shortage of computer chips continues to drastically reduce the number of new cars being manufactured, which continues to drive up the used car market.
As for insurance rates, Lindeman says rates have remained fairly steady, but as people buy higher value vehicles, they’re also seeing higher insurance premiums.