A brand new car loses somewhere between 9-11% of its value, the moment you drive it off the showroom lot. The culprit? Depreciation. 🚗
Since our vehicles are primarily a mechanical device it is prone to regular wear and tear and loses its efficiency over time thereby losing its value. According to IRDAI, by the 4th year your vehicle will lose around 50% of its value due to depreciation. The depreciation rates also varies as per the component of the car. For eg – rubber, nylon, plastic parts and batteries have the highest depreciation rates.
When we make insurance claims for damage to our vehicles the insurer will not cover the depreciation cost of the components being replaced. For eg, if your car is more than 4 years old then you may have to pay close to 50% of the bill.
To avoid paying this, it is recommended to also get a ‘Zero Depreciation Add-on’ to your vehicle insurance. This add-on typically costs 15% of the base insurance premium and varies as per the model of your car, location and age. It is not available for vehicles older than 5 years.
➡️ Source: Digit, Ramsey Solutions
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