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Make sure insurance is part of cost consideration

Many factors affect the used car market but they are often of little consideration to company car drivers. As mentioned in previously Monitor columns, good fuel consumption is vital to many used car buyers, as they are often working to a tight budget.

They are also less willing to pay for much of the additional equipment that new car buyers believe is important - usually as a status symbol.

However, one of the most important factors considered by the average used car buyer is the cost of insurance. This is something that rarely figures when company car buyers make their choice, unless of course they pay for their own policy.

Insurance rates, which have been kept artificially low by insurers who were desperate to compete in a cut-throat market, are now rising rapidly. It is surprising how much even basic cars can cost to insure.

As an example, the humble Vauxhall Vectra 1.8 LS carries a group 11 insurance rating, while the Renault Laguna 2-litre RXE estate is a group 14.

Many companies, who are covered by umbrella policies, believe these insurance ratings are of little consequence. But in the used car market high insurance groupings can often make or break a deal.

Often these cars will not be driven by just one named driver; they will have younger drivers included on the insurance policy. This can make them unaffordable to insure. Consequently, residual values often reflect the fact that a vehicle carries a high insurance group.

Many larger engined models are now worth little more than their 'standard' counterparts because of the insurance factor, coupled with additional fuel and servicing costs of such engines.

Fleet managers have to make a choice to enable their company car owners to drive a model that meets their needs while protecting residual values.

Alternatives are available that offer far more sensible insurance groups. Taking the Vectra as an example, an equivalent Mondeo is a group 7, as is a 1.8-litre Astra. Whereas the Laguna is a group 14, an equivalent Passat estate is a group 8.

This is not to say that fleets, and dealers, should ignore the higher insurance group options, as there will always be a market for them.

But as the cost of insurance rises year-on-year - and it looks certain to continue this trend in the short term - buyers of such cars would be wise to keep an eye on how much it is likely to cost to insure in the future.

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