New car replacement car insurance policy

Reader question:

Should I get new car replacement coverage on my car insurance policy?


Yeeeeeaa—maybe not.

I’m pretty much alone in my liking for the new car replacement coverage, so I’ll put that bias of mine out right up front, and the reasons for it. What’s the reason? I have a new car and I’m terribly paranoid about it. This is understandable, I guess, because it’s my first new car and I’ve gone through so many repairs on the older ones I’ve had, so the idea of getting into trouble with the new one is terrifying. I look both ways before crossing the street in that car, you can be sure. And boy is it clean.

So now that you know how I feel, let me try to offer you both sides of the issue. On my side, think about it. You are spending all that money on a brand new car, but the second you drive it out of the lot, it depreciates rapidly. You could get into a wreck just a couple months down the line, total it, and get cash for the depreciated value of your car. Go back to the lot and you won’t have anywhere near enough to get the same car you had before. You’re losing thousands of dollars sometimes, just through the depreciation. New car replacement coverage helps you avoid that by allowing you to buy a brand new car if you total your other new one if you do so within three years of first buying it.

However, on the other side, many people will remind you that this is a bit of a silly add on. It’s very unlikely that you’ll total your brand new car. It doesn’t happen very much, and if you’re careful, it probably won’t happen to you. You’ll be paying extra on your premium for something that probably won’t ever happen unless your particularly good at getting into accidents, and this just isn’t a financially sound way to go about things. In the end, though, it’s up to you.


Fashun Guadarrama.

Posted in: Auto Insurance

About the Author:

  • Sarah

    I am thrilled that I came across your blog! I’m looking forward to reading through your post! Thanks!

  • Pingback: IPO - Initial Public Offering Blog » Blog Archive » New car replacement car insurance policy()