It's commonly accepted that the value of many specialist and classic cars can be affected by a repair following an accident, but how might this actually have an impact to you and how does it relate to an insurance policy?
We'll start by exploring how a car's value might be potentially reduced.
To do this, we'll need to expand on how insurance companies repair vehicles and how they work with manufacturers.
In the UK, every brand new vehicle is allocated an Insurance Group. The scale ranges from 1 to 50, with 1 being the lowest rated and 50 the highest. These groups are set by the Association of British Insurers (ABI) with testing being ABI carried out by Thatcham Research.
To designate a vehicle with its group, one of many factors is the cost of repairs and also the time it will take to repair as this clearly plays a significant part. As a result, manufacturers provide repair times for the vehicles they make and these are factored in when a vehicle is damaged and needs to be repaired.
This makes the process of an insurer authorising repairs to your vehicle simpler and faster as the costs involved are, to a large extent, pre-set and agreed.
However this obviously doesn't apply to older cars where such repair times aren't published. Vehicles over 25 years old and certainly those made before 1990 will not have a set repair time and parts for many are harder to find.
The above applies to all vehicles but our particular focus is on the specialist and classic sector so next we'll explain how this translates to how a vehicle which has been repaired could subsequently be worth less.
For more modern cars, including brand new models, significant damage may make the vehicle less desirable and this has an inevitable impact on its resale value. Whilst there is a market for damaged vehicles, and it's possible to find some bargain vehicles including specialist cars from salvage dealers and auctions, many buyers would avoid buying a vehicle which has been substantially repaired and the values of those for sale are significantly cheaper when compared to an identical, undamaged, vehicles.
If you are purchasing from a motor trader then the Sale of Goods Act 1979 protects you and we'll look at this separately in a future article and compare this to buying a vehicle privately.
The case for proving a loss in value following a repair is therefore simple to demonstrate for newer cars but what about older vehicles, including classic cars?
There are no published repair costs or times for these vehicles so any repairs will be assessed and estimated by the company you engage to repair your vehicle. The repairer will then discuss the work with the insurance company's engineer – in many cases, they will provide an initial authority to begin stripping the vehicle to assess the level of damage and extent of likely repairs.
Classic vehicles which have been previously repaired present a less clear-cut picture than their modern descendants. When buying a much older car, it is fair to assume that it may have had repairs at some stage during its life. The aforementioned Sale of Goods Act will still apply to any vehicle bought from a motor trader but there remains debate as regards just how much of a car's history a dealer can be reasonably expected to be able to investigate.
For many classic car enthusiasts, continuous history is of equal importance – for example, if a vehicle has been repaired at some point using parts which are incorrect for the model, or cheap pattern (non-genuine) items, then a restorer may opt to replace them with original parts if available but will retain the parts removed to demonstrate continuity. Without these parts, it may be harder to trace repair or restoration work.
If a vehicle can be shown to have never been repaired or restored during its life, then any subsequent repairs can reasonably expected to have a negative effect on its value as truly original cars will generally command a higher value.
Interestingly, there is no legal definition of “original” despite several court cases in recent years – many industry experts refute there being any vehicles which have never had work beyond routine maintenance carried out and the phrase “Trigger's broom” is widely used to describe many old cars.
The lack of a legal benchmark at the time of writing does create a lack of clarity and leaves originality open to interpretation.
The last 20 years has seen growth in manufacturers supporting the owners of classic cars, not only by supplying genuine parts but also with the introduction of factory certification schemes. In many cases, vehicles which have been through this process are regarded as having an enhanced value and the same can be said of many vehicle restoration companies whose work is considered within the sector to be of a very high standard.
The increasing appeal of classic cars as an investment vehicle (pun intended) has perhaps focused the industry a little more with buyers seeking the very best example of a particular model and buying into factors including originality – this buyer might arguably and understandably be more concerned with anything which impacts on originality, potentially value and therefore return on investment.
The way to determine loss of value currently therefore works on the vehicle having a defined value set, by way of formal valuation. If it is damaged, repaired and then revalued at a lesser figure which relates directly to the fact that it has been repaired and not a change in market conditions, then it has lost value.
Most motor policies will include a general exclusion relating to loss of value as they focus on physical loss and damage to the vehicle and repairs or replacement only and this is where Lockton's policy can provide additional protection.
If you're unfortunate enough to damage your vehicle, our policy will provide cover for it to be repaired at a repairer of your choice. If you have owned the vehicle for less than 2 years, or it has been independently valued within the previous 2 years, and it is subsequently valued at a lesser amount, then our policy will cover this loss in value.
It will pay the difference between the pre and post loss agreed value at either up to 100% of the repair cost or 25% of the sum insured, whichever is the less, up to a maximum of £500,000.
This is only available for vehicles over 15 years old and relates to claims for partial damage only – a total loss type claim would be dealt with based on 100% of the agreed value.
To translate this into a real world scenario, the below we hope will assist.
Vehicle 1971 Ferrari 246 GT Dino
Agreed value £350,000 – valued by the Ferrari Owners Club mid 2019
Vehicle history proves 2 owner vehicle from new and only minor restorative work undertaken including a Ferrari Classiche certificate in 2016
Circumstances are that the vehicle was involved in a single vehicle loss of control RTA sustaining significant frontal damage
Repair estimate £90,000 and vehicle repaired to owner's complete satisfaction
Vehicle subsequently revalued at a figure of £300,000 to reflect the repairs
Policy pays 100% of the reduced value = £50,000 as this figure is lower than both the repair cost and 25% of the original sum insured (£350,000 ÷ 4 = £87,500)
With the values of classic cars showing little sign of slowing down or reversing the trend of the last 25 years, and the market expanding to accommodate even more modern and emerging classics, we believe that this extension is important when choosing your insurance.