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New vs. Used Cars: What You Need to Know About Auto Insurance Before You Buy

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Whether you go for a brand-new car or choose to shop for something used, you’re going to need insurance when you buy a car. However, what many consumers don’t realize is that the insurance needs are actually different for new and used cars. Regardless of which side you choose in the new vs. used debate, be sure that you fully understand what each option entails as you decide on your new purchase.

Insuring your new car

When you buy a new car, you can generally custom order exactly what you want out of your purchase. You’ll probably have less maintenance to do from the outset, and you’ll likely receive warranty coverage from your dealership. Insurance companies understand the value of these benefits and may even give you a discount for owning a new vehicle. Check with your agent to see if your insurer offers this type of discount.

On the other hand, new vehicles are also more susceptible to theft, making them more costly to insure. Insurance companies consider this risk, along with other factors such as the primary driver and where the vehicle is garaged, when determining insurance costs.

Insuring your used car

Buying a used car has its own set of benefits, including (in most cases) a lower purchase price. There are advantages in terms of your auto insurance as well. It costs a lot less to repair or replace a used vehicle than a new one, which can mean lower premiums.

If you buy a used car, talk to your agent or carrier about adding replacement cost coverage to your policy. If your vehicle is totaled in a collision, this level of coverage will often give you a new car (or the cash equivalent) equal to the original value of your old car, which can help prevent you from losing money for depreciation.

Work with your insurance agent

Consumers sometimes overlook the cost of insurance completely when shopping for a car and may experience sticker shock when they see their insurance bill. So whatever option you feel is best for you, be sure to do your research ahead of time and understand your options and the related costs.

Review your budget carefully before buying any car and talk about the purchase with your insurance agent. They can help you figure out which insurance coverage is the best for your car, whether you bought it new or used.

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