Latest Press Releases

Article Name

Pre-loved, a bargain or a risk? Navigating the insurance for second-hand vehicles

South Africa’s second-hand car market is thriving, with demand for used vehicles far exceeding that for new cars. WesBank’s Business Intelligence data for the first half of 2024 shows that pre-owned car applications are outpacing new car applications by more than 2:1. Many of these vehicles, particularly those sourced through non-traditional channels, often come with limited or no service history and there are inherent risks that buyers should be aware of before making a purchase. Understanding these risks and the role of insurance in mitigating them is crucial for a safe and secure investment.

Risks associated with buying second-hand vehicles

Purchasing a pre-owned vehicle can be cost-effective, but it comes with potential risks. Buyers should conduct thorough due diligence to avoid costly surprises.

• Vehicle history and condition: Not all second-hand cars are in good shape. Some may have been in accidents, poorly maintained, or have hidden mechanical issues. Always request a full service history and have the vehicle professionally inspected.
• Odometer fraud: Tampering with mileage readings is a common scam. Ensure the odometer reading matches service records and looks consistent with the car’s age and condition.
• Stolen or cloned vehicles: Some used cars may be stolen or illegally cloned. Verify the VIN and check ownership details through the appropriate authorities.
• No warranty or limited protection: Second-hand vehicles are often sold voetstoots “as is”, with no warranty or after-sales support. Buyers must be prepared to cover any repairs or maintenance themselves.

The role of vehicle assessment reports

Many buyers rely on vehicle assessment reports to gauge a car’s condition. While these reports offer valuable insights, they may not always reveal the full picture, especially regarding repair history. 

To avoid surprises, buyers should:

• Request all available documentation from the seller.
• Arrange an independent mechanical inspection before committing to the purchase.
• Consult their insurer to understand any potential cover limitations.

Insurance considerations for second-hand vehicles

Insuring a second-hand vehicle is just as important as insuring a new one. However, insurance policies for used cars can vary in terms of cover, costs and requirements.

• Comprehensive vs. third-party insurance: Buyers should decide between comprehensive insurance (covering theft, own damage and third-party liability) and third-party only insurance (covering damages to other vehicles only but not their own).
• Vehicle valuation: Insurance premiums are based on the car’s current market or retail value. Older vehicles usually have lower premiums.
• Mechanical breakdown insurance: Given the higher likelihood of mechanical failure in used cars, some insurers offer policies that cover major repairs and breakdowns. Always confirm if your policy includes this, as it may not be automatically covered under a standard short-term insurance policy.
• Tracking and security requirements: Many insurance companies may also require second-hand vehicle owners to install tracking devices or anti-theft measures to reduce risk and qualify for better premiums.
• Excess and claims history: Insurers may impose higher excess payments or specific conditions on older vehicles. Buyers should compare policies to find one that offers a balance of affordability and protection.

Making an informed decision

The second-hand car market offers significant benefits, including affordability and a wide range of options. However, buyers should approach insurance carefully. By being transparent about a vehicle’s history and verifying its condition, buyers can secure the right coverage and avoid unexpected financial setbacks.

Herman van Heerden, CEO of PPS Short-Term Insurance, advises, “A second-hand car can be a great investment, but it is essential to treat insurance with the same care as the purchase. Providing accurate information about the vehicle’s history and condition ensures the policy is tailored to its specific risks, offering buyers better protection and peace of mind.”

If unsure about what to disclose, it is crucial to be open and seek guidance from your insurer. Information that could impact a future claim – such as a vehicle's history of being written off, previous damage, or if it’s been rebuilt – should always be shared upfront, as these details can affect the settlement amount.

PPS Short-Term Insurance offers comprehensive cover for home, car, house and building insurance. Interested in an obligation-free quote? Click here or speak to one of our dedicated financial advisers, who will reach out to assist you.

PPS Short-Term Insurance is an insurer licensed to conduct non-life insurance business and an authorised FSP.