There are many advantages to purchasing a new vehicle. You know for certain it hasn’t been driven very much – the kilometres on the odometer will prove this – and that it will be in pristine condition. New vehicles come with extensive warranties that will ensure any necessary repairs are taken care of, usually up to a certain number of kilometres driven. Car dealerships often offer excellent maintenance and care packages for new vehicles as well, and often financing can be provided at a very low interest rate. A new car also comes with advanced safety technology that helps keep you and others safer on the road. With a new car you can choose exactly what details and customizations you want, such as the colour, seat fabric, trim, stereo equipment, even right down to the kind of floor mats. Plus, there really is no beating that new car smell.
A new car is great, but unfortunately there is truth to the old adage that it will lose value the moment you drive it off the lot, says the Globe and Mail. According to the Canadian Black Book, new vehicles depreciate from around 30 to 40% during the first year of ownership. Many lose less and some lose more, but there’s no getting around that if you wanted to sell your new car shortly after you bought it you would almost certainly lose a fair amount of money.
Most drivers are aware of the depreciation factor for new vehicles and are willing to overlook that fact for the benefit of driving a car that is safe, comfortable, and that uses some of the most cutting-edge technology out there. Don’t forget, however, that car insurance works by covering the actual value of a vehicle. If you are in an accident in your brand-new vehicle it is not likely that you will get the amount you paid for it back from your insurance company, which can leave owners on the hook for thousands of dollars.
What is guaranteed auto protection (or “gap”) insurance and why is it important?
Let’s say you have just purchased a new vehicle for $40,000. Even at the low end of the scale for depreciation – let’s give it 25% for the sake of easy math – your vehicle will be worth $30,000 shortly after you take it home. If you happen to get into an accident where your vehicle is written off, it’s more than possible that your car insurance company will only compensate you for its actual value of $30,000, leaving you on the hook for that extra $10,000.
Guaranteed auto protection, more commonly known as gap insurance, helps make up the difference if the amount that you owe on your auto lease or loan is more than the value of the vehicle. It is a very affordable type of insurance that is provided by both car dealerships and insurance companies. If you have been shopping for a new vehicle and think you have spotted the one that you want, give an experienced car insurance brokerage a call. We have several options available from a number of different providers and can give you an initial quote for gap insurance coverage. That way, when you go to sign the final papers and your dealership offers gap insurance coverage as part of your payment plan you have a base number to work from to either bargain with the dealership to lower their premiums or go back to your broker and sign up for coverage.
In some jurisdictions, gap insurance takes a slightly different form and is called replacement insurance. With replacement insurance, claim amounts will not be adjusted for the depreciation of your vehicle. Replacement insurance will be added on to your regular car insurance package as an endorsement. Both gap insurance and replacement insurance are commonly available for from three to five years after the purchase of your vehicle. Again, it is more than likely that you will get a better deal on replacement insurance from an experienced insurance broker such as us at Lane’s Insurance than you would from a dealership.
Thinking of buying a new car? Contact us at Lane’s
Insurance brokers such as us at Lane’s work for you, not the insurance companies. We are your ally in the insurance business. It’s our job to find you the best car insurance coverage at the lowest possible rates out there.
It doesn’t take long to get a fast and free car insurance quote from us. Give us a call at our Calgary, Banff, Edmonton, or greater Alberta offices so we can shop through the policies provided by our trusted providers and help reduce the cost of your coverage.