As the cost of new cars increases, insurers have warned that advanced tech, repair complexity, and supply chain pressures may soon hit drivers' wallets at renewal time.
According to the latest Consumer Price Index (CPI) report from Statistics Canada, the cost of new vehicles rose by 4.9% year-over-year in May, up from 4.6% in April. While overall inflation held steady at 1.7%, the continued rise in vehicle prices is one factor that could lead to higher insurance costs for Canadian drivers.
Matt Hands, vice president of insurance at Ratehub.ca, explained that insurance premiums typically rise with the value and complexity of vehicles.
“Newer models and electric vehicles tend to feature advanced technology, specialized parts, and systems that increase repair and replacement costs,” he said. “Insurers factor these expenses into premiums to ensure they can cover potential claims.”
Hands added that recent supply chain issues and rising labour costs are also contributing to higher claims expenses. In addition, US tariffs on imported vehicles and auto parts are expected to affect Canadian repair costs as manufacturers and service providers pass these costs on to consumers.
“All of these factors are pushing insurers to re-evaluate pricing, and drivers may notice the impact at renewal,” he said.
Electric vehicles, in particular, often carry higher premiums due to the high cost of batteries and the need for specialized repairs. Morgan Roberts, vice president at RH Insurance, noted that while EVs can be more expensive to insure, they may qualify for discounts through some insurers due to their safety features and lower theft rates.
To help offset premium increases, Hands recommends that consumers shop around, compare quotes from different insurers, and explore discounts such as bundling home and auto policies, maintaining a clean driving record, or driving vehicles with advanced safety features. Adjusting deductibles on collision and comprehensive coverage may also help lower monthly premiums.
As vehicle prices continue to rise, experts advise drivers to stay informed and review their policies regularly to ensure they have adequate coverage while managing costs.
