Second-hand cars and insurance: Hidden costs no one talks about

Buying a pre-loved car is a practical choice, especially for those on a budget. For many Filipinos, it offers an affordable way to gain mobility without the high cost typically associated with a new vehicle. However, behind all the financial benefits, there is a harsh reality that few talk about. We are talking about the hidden cost of owning a used car, especially when it comes to insurance.

Cost of owning a used car

The total cost of owning a used car ranges from the LTO transfer fee to maintenance costs to insurance premium adjustments. Together, all this adds up to a price much higher than one would ever expect.

In this article, we’ll discuss the hidden financial pitfalls of buying a used car and insuring it in the Philippines.

So, let’s begin…

Used car insurance in the Philippines

Is used car insurance different from new car insurance? Yes, insuring a second-hand car is not the same as insuring a new motor vehicle. Providers evaluate a unit's risk by considering its age, current market value, and condition. Although older cars typically have lower values, that doesn’t necessarily mean cheaper insurance. Why is that? Old cars are considered high-risk assets due to outdated safety features, potential wear and tear, and unpredictable repair costs.

It is also a fact that some insurance providers in the Philippines refuse to provide comprehensive coverage to vehicles that are 10 years old or older. At the same time, others offer limited coverage or impose high deductibles to offset risk.

Also Read: What's not covered under your car insurance policy?

Types of car insurance for used cars

CTPL insurance: It is mandatory for all vehicles in the country and covers third-party bodily injury or death in the event of an accident involving the insured vehicle. While the coverage is limited, CTPL is required for vehicle registration and renewal.

Comprehensive insurance: Optional but highly recommended for its broad coverage. It provides the insured with financial protection against fire, natural disasters, accidental damage, and theft.

Add-ons: If needed, policyholders can opt for added coverage as per personal requirements. For instance, owners can get Acts of God and Personal Accident coverage at an additional cost.

Also Read: Car insurance add-ons in the Philippines: Which ones are worth it?

Secondhand car ownership & hidden cost

The table below reveals the hidden costs a second-hand car owner has to bear in the Philippines -

LTO processing fee & cost of transferring  ownership	The car ownership transfer process in the Philippines involves several charges, including notarial fees, LTO transfer charges, and emission testing costs. If the car registration is outdated, be prepared for additional penalties.  Note that all the above costs vary by vehicle type and region.
Repair and maintenance cost	Often, second-hand cars come with undisclosed mechanical problems. Standard hidden costs include worn-out tyres, engine overhauls, and outdated parts not covered by insurance.
Depreciation & premium	It is a fact that used cars depreciate faster, and insurers base coverage on the car’s current fair market value. Meaning, if the car’s value decreases, the claimable amount also decreases—the premium remains the same.
Insurance claim processing cost	Some insurance providers charge a processing fee when you file a claim, and you also need to shoulder the deductible.
Unsettled violations & liabilities	If the previous owner fails to settle traffic violations or penalties, the new owner may unknowingly inherit the costs. It is therefore crucial to verify the car’s record before finalising the sale.

Common issues faced by policyholders

Non-disclosure issues: When applying for insurance, the policyholder must disclose all prior damages and/or modifications. Failing to do so could result in the denial of the claim. Complete and fair disclosure ensures a smooth claim process and avoids legal complications.

Salvage value clause: When a car is declared a total loss, the insurer deducts salvage value from the claim. This deduction often surprises policyholders who expect full compensation.

Underinsurance: Do not make the mistake of declaring a low car value to save premiums. This would result in a partial claim settlement, as the provider will only pay a percentage of the total repair cost.

Also Read: 6 Smart ways to never forget your car insurance expiry date

How to avoid paying more

Choose a reputable insurance provider 
Don’t wanna pay more for car insurance? Then make sure to choose a well-established provider with a high claim approval rate. Make sure the Insurance Commission has accredited the provider and has good customer reviews.

Do proper research before buying the vehicle & insurance
Whether you are purchasing a car or an insurance policy, research is a must. So, when purchasing the car, we’d advise you to use LTO’s online tools or request the vehicle’s OR/CR to confirm ownership and avoid hidden liabilities.

Request multiple quotes
Compare quotes from multiple insurance companies —not just on premium, but also on coverage, customer support, and the claim process.
Smart insurance tips for second-hand car owners

Review your policy annually 
It is necessary to regularly reassess your policy to ensure you aren’t overpaying for a depreciating vehicle. This practice will help you update your policy to fit your driving habits and location risks.

Regular vehicle inspection 
Have your vehicle inspected annually to maintain accurate insurance coverage and ensure the car’s condition matches its insured value.

Know policy exclusions 
Read the fine print, ask your provider/agent about policy exclusions. Some policies don’t cover Acts of God unless explicitly mentioned.

Understand deductibles 
Make sure to ask your agent or provider for a complete breakdown of deductibles. This will help you appropriately take coverage.

Also Read: Cheap car insurance: Smart savings or a costly mistake?

Bottom line

Buying a second-hand car is considered a smart financial move; however, to make it a profitable deal, you must understand all the hidden costs. From unseen transfer expenses to insurance limitations, there are several costs associated with owning a pre-loved unit. The best defence against such overspending is proper knowledge of all such costs.

Talking specifically about insurance, we’d say that while it is essential to insure a motor vehicle—new or used —it must be done right and with utmost care. Some of the most common and recommended practices involve choosing the right insurer, reading the fine print, and reviewing the policy regularly. Doing all this will allow you to enjoy the benefits of car ownership without falling into common financial traps.

 

Also Read: Your go-to guide for car insurance renewal in the Philippines