Car owners in the South West could lose out financially if their vehicle is written-off, an insurance expert has warned.

"When it comes to renewing vehicle insurance, many owners do not realise that the market value of their cars is often more than the invoice price they paid when the cars were new," said Dorothy Pigg of insurance brokers Lycetts.

"Traditionally, the assumption was that a new car automatically depreciated in value as soon as it was driven out of the showroom. But in the last two years many used cars have appreciated in value.

"The reason for this has been caused by a shortage of new cars, which has driven up demand for used cars."

A global shortage of semiconductor chips – an essential element of new car production –was caused by the impact of the pandemic on production staff and supply chains. This led to delays in production, and sometimes a halt.

As a result, waiting lists for many new cars are twelve months and above. Some car manufacturers are unable to give a build date, and others are declining to take new orders.

"During the lockdown, when car travel was restricted and sometimes unnecessary owing to directives to work from home, the unavailability of new cars had a lesser impact," Pigg said.

"But now restrictions have eased and employees are being encouraged to return to work, the absence of new cars means a rise in demand for used cars.

"It is important that owners know that many vehicles are appreciating, not depreciating in value, and take this into account for insurance renewal reviews.

"During a recent review with a client, he thought it was adequate to keep his car insured at its purchase price value because it was less than three years old.

"A week before renewal the car was involved in an accident and was written off. Our records noted the value as £36,000 – the purchase price 20 months ago – but after investigating we found the market value was around £42,000!"

Due to the current market conditions, Pigg also advised caution when considering GAP insurance cover.

"GAP insurance covers the difference between the price paid for a new car and the amount your insurer would pay if the car were written off. Three years ago this might have been worthwhile but perhaps not so much at the moment, so you should take professional advice before purchasing this cover."