David Fortier

By David Fortier

April 19, 2021


How to pick the right insurance for your used car

Thinking of buying a used car? What are the major differences you need to know about auto insurance? Let us tell you how to pick the right insurance for your new vehicle!

Is the coverage offered for used cars the same as coverage for new cars?

Almost. The Quebec Automobile Insurance Act provides that all vehicle owners must take out auto insurance which minimally includes civil liability.

On top of this mandatory coverage, you can also add optional coverages for property damage to your vehicle. The same optional coverages are offered for new and used cars, with two exceptions.

  • The Replacement Value coverage (endorsement Nos. 43A and 43E – Change to indemnity) is only available for new vehicles.
  • Endorsement No. 43D – Purchase Price Option and Endorsement No. 43F – Increased Settlement, are only available for used vehicles.

Is there a way to protect the money I invested in my used car in the event of a total loss?

Yes! La Capitale is the only insurer to offer Endorsement No. 43D – Purchase Price Option for used cars. In the event of a total loss, this optional coverage ensures that you will be compensated based on the price paid for your new used car.

For example, let’s say you paid $10,000 for a used car two years ago and you get into an accident which results in a total loss and the depreciated value of your car is at $5,000. If you hold the Purchase Price Option, you will be reimbursed based on the price you paid at the time of purchase, i.e. $10,000. If you don’t hold the Purchase Price Option, you will be reimbursed based on the depreciated value of the vehicle at the time of the accident (its market value), i.e. $5,000.

If your vehicle was financed, the Purchase Price Option allows you to settle the balance of the the loan for this vehicle, even if the value at the time of the accident is lower than the amount of the loan balance.

Some insurers, including La Capitale, also offer Endorsement No. 43F – Total Loss – Increased Settlement for used vehicles. In the event of a total loss, this optional coverage guarantees you will be reimbursed based on the value of the vehicle on the day of the accident, plus a bonus of 5% per year elapsed since its purchase. In other words, although not equal to the vehicle’s purchase price, the upgraded payment will compensate you for the depreciated value.

Does it cost less to insure a used car?

Several factors impact auto insurance premiums. In general, under the same conditions (vehicle model, accessories, use, geographic location, driver profile, coverage selected, etc.), the premium for a used car should be a bit lower than the premium for a new car.

Obviously, it all depends on the type of coverage, optional coverages and the amount of deductibles you choose. Your insurance representative is there to advise you on the coverage best suited to your needs, but it’s up to you to decide how much risk you’re comfortable taking on. In other words, if something were to happen to your car (accident, fire, theft, vandalism, etc.), how much of the cost would you be able to cover?

What is depreciation and how can it impact you?

Depreciation is the difference between the purchase price of a vehicle and its resale price. Depreciation occurs when the vehicle’s market value goes down and varies based on the model, features (transmission, fuel consumption, new or old model, etc.), mileage and maintenance of the vehicle.

A new car loses approximately half its value during the first three years after it leaves the assembly line. After this period, the depreciation is less significant over the years. Most people buy a used car because they don’t want to lose a large chunk of their investment on their new vehicle.

But don’t forget that even if the value decreases more slowly, a used vehicle’s value also depreciates. That’s why more and more insurers offer coverages that let you protect your investment in a used car.


Additional resources:

Purchasing a Vehicle: 4 Tips to Save You Money

Used Cars: A Buyer’s Guide to Rights and Responsibilities

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