Enter Your ZIP Code

The Difference Between Used Car Insurance and New Car Insurance


Those in search of an insurance policy for their cars will most likely encounter two types of insurance – the used car insurance and new car insurance. It will greatly help to differentiate these two and guide buyers from getting the right and best policy for them.

First things first. The names of these policies alone immediately give an idea what they are basically. Used car insurance is for old or secondhand cars while new car insurance is for brand new cars.

Used car may be something bought firsthand, but is being used for many years now. It may also be a newly bought, but previously owned car. Its insurance generally has a lower premium. Insurance companies explain that should used cars get stolen or become wrecked totally in an accident, it will cost them much less to replace them. This is because cars depreciate at a fast rate over a period of time, and therefore have a lower market value. In fact, depreciation begins right after a vehicle is taken out of the shop and driven on the road.

Insurance companies offer the same line of reasoning in the case of collision accidents. If this happens, used car insurance may cover for the cost of replacing body parts or accessories, body repaint, or engine restoration, all at cheaper rates.

On the other hand, new car insurance of brand new units is generally charged with higher deductibles. Simply put, the cost of replacing or repairing newer cars is more expensive should anything happen to it when driven on the road. Its body parts and accessories will be more expensive compared to an older car.

New car insurance generally bears a higher premium. However, this is not easily calculated based on the car’s age alone. There are other variables coming into play in the computation. For example, some car owners overhaul their used cars to add more power to its engine. In this case, the car will be considered a higher risk than a new car equipped with a standard engine. Faster cars are more dangerous and will be granted higher insurance rates.

Insurance companies also study a driver’s profile when giving out auto quotes. After all, a car, whether old or new, will not move on its own without a driver behind the wheel. His gender, age, driving history and past records will be analyzed in-depth to figure out if he is a relatively safe and responsible driver or if he is high risk. If his background review reveals he has a tendency to be reckless, he may have to pay for a more expensive insurance.