Do you want to ask your questions about how the price increase in vehicles impacts the value of insurance? So you are in the right place. In today’s article, I will explain the factors that made cars more expensive in 2021/2022 and how this influences the price of auto insurance.
Vehicle prices have risen significantly in recent years and the pandemic period has undoubtedly had an immense impact on this market. Many factors lead to higher prices, which are reflected not only in the FIPE table – a recognized tool in the national market linked to the average pricing of vehicles – but also in the final price of the insurance. Want to better understand this dynamic? So keep following this article.
What is the FIPE table?
The Fire tablet is a reference used as a basis for querying vehicle data. Updated monthly through surveys, FIPE is used according to car negotiations, as it assesses the average price of vehicles advertised in Brazil.
Therefore, the Fipe table is essential to calculate the price of the geico insurance, since the insurers take into account the indemnity value of the car.
The FIPE table was prepared by the Fundação Instituto de Pesquisas Econômicas, based on research carried out in 24 states in the country — so that the difference between the prices of the same car would not be so great — and works as a parameter for the purchase and sale negotiations. sales of vehicles in the Brazilian market, with average values that vary according to the make, model, and year of the car.
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The table is an excellent starting point for negotiating or evaluating vehicles, functioning as an instrument that guarantees a fair value for buyer and seller, including influencing the contract with insurance companies and finance companies and the calculation of IPVA.
How does the FIPE table work?
The index is built based on the collection of prices for new and used cars, minibusses, buses, motorcycles, and trucks in a given period, with values updated monthly.
In this way, a statistical analysis of these prices is made considering all the characteristics of the vehicle. From this, an average is calculated and used to establish the value referenced in the list presented in the table.
But why are cars expensive anyway?
As we said at the beginning of this post, many factors have a direct impact on the price of vehicles – and the pandemic is, without a doubt, what had the greatest weight in this high period.
Understand better what impacted this scenario.
factory shutdown
With the covid-19 pandemic, which imposed limitations and restrictions on various economic activities for extended periods, some factories were also paralyzed.
This impacted the price of used cars, by reducing the supply of cars by 0 km, it was natural that those who were thinking about or needing to buy used cars. Due to the law of “supply and demand”, the price goes up.
In addition, the low stock left many stores without supplies. The seminovos ended up replacing this space.
High demand
Many people stopped using public transport during this period or moved to other locations. To give you an idea, in one of the largest state capitals in the country, São Paulo, the reduction in the use of public transport reached 62%, according to information from the state government. As a result, the demand for a car of their own has increased.
There are not always used cars of specific models in sufficient quantity to meet the desire of all consumers or in the regions, they are looking for. That’s because many factors are also taken into account when buying, such as mileage and condition.
Soon, vehicles that better met the requirements had increased prices.
lack of materials
For vehicle manufacturing, a whole chain of supplies and materials is mobilized. Rubber, glass, aluminum, and electronic parts, among others, are necessary for this production to take place.
One item, in particular, had a strong impact on this segment: semiconductors, materials used to conduct electrical currents, and raw material for chips present in various electronic equipment, such as computers, smartphones, televisions, and automobiles. As the latter paralyzed its production throughout 2020, the companies of these components began to reserve their production for other electronic items.
With the auto industry rebounding, semiconductor factories are simply no longer able to fully meet this demand, delaying the availability of new cars on the market.
Another point to consider is that these materials have also become more expensive. With low supply, there is always greater dispute and higher costs to produce and acquire. This was causing a ripple effect.
ICMS
The ICMS (Tax on the Circulation of Goods and Services), which is levied on the purchase of cars, also rose.
In October 2020, for example, it was 1.8% to 5.3% of the sale value. The result was an increase of 207%, therefore.
This reflects in the final price that comes to the consumer.
The successive rise in the price of new cars
Finally, with all that has been mentioned, new cars, when produced, have increased in price. This is because, in general, the cost became more expensive, taking into account the entire operation in more difficult conditions.
Thus, it is expected that after the successive increase of 0km, the used vehicles will also be affected by the same effect.
Modern cars, higher cost
It is also important to contextualize that the value of cars was already rising gradually before the pandemic. It is impossible to compare a popular car produced today with those that were on the market a decade or two ago. After all, even in entry-level models, the technological resources used have a high cost for automakers, which in turn impacts the final price for the consumer.
Although with the cooling of the pandemic and the return of production values can return to normal, a very significant drop cannot be expected.
How does the FIPE table impact auto insurance?
Now that we have already brought some reasons for the high vehicle prices in 2021/2022, which directly affect the FIPE table, it is a little simpler to understand this issue.
The most important thing to consider is that the insurance value is linked to the average price of the vehicle referenced by FIPE – and if it reflects this period of high vehicle prices, the insurance value will follow this trend.
In addition, in the case of indemnity, the value will also be according to the average of this table and the month in which the indemnity will be paid by the insurance company – which can make this value go up or down, according to the market price of the car. in this period.
However, it is worth mentioning that this is only one factor taken into account when calculating the insurance value, since the driver’s profile, vehicle characteristics, and circulation region are also included in the final price.
Most expensive spare parts
Another important point is that the scarcity of raw materials also impacted the value of spare parts. That is, in the event of an accident, such as a collision, the cost of repair also increases, which means that the value of the insurance also follows the rise in the market value of automotive parts.
As you have seen in this article, the FIPE table is the most important market reference for vehicle pricing and is also reflected in the hiring of services for this segment, such as auto insurance. However, whatever the value of your car, it is essential to protect such an important asset.
Avoid unforeseen events: quote your insurance
Have you ever thought if a problem occurs in your car and you don’t have insurance with 24-hour assistance? What if you have your car stolen, stolen, or had an accident that results in a total loss? All of these are events that may be covered by insurance.
