Does Insurance Cost More For A Newer Car?

9 minute read Published on Nov 6, 2022 by BrokerLink Communications

Are auto insurance rates affected by how new your car is? Find out more here.

If you are interested in purchasing a new car but want to find out if your insurance rate will go up, you’ve come to the right place. Buying a new vehicle is exciting, but it’s important to consider the impact on your car insurance before doing so. Keep reading to learn more about car insurance costs for new cars versus used cars.

Car insurance for a new car

Car insurance typically costs more for new cars as the cost of replacing or repairing them is higher. Therefore, if you get rid of your old car and buy a new car, your insurance premium may go up. This is because it will cost the insurance company more money to buy a part for your new car or buy a new one to replace it if it is damaged or stolen. That said, new cars are often equipped with safety features, which can actually reduce your insurance premium. For example, if your car has new technology like brake mitigation, lane assist, or more built-in cameras, this decreases the odds of getting into an accident, which can save you money on car insurance. On the other hand, the cost of replacing vehicle parts that contain this new technology is more expensive. For example, a basic bumper that once cost $500 to replace may now cost much more if it contains lasers, sensors, or cameras.

Furthermore, if your new car is leased, some insurance companies may require that you purchase coverage above the minimum requirements. Although provincial law may only stipulate that you need $200,000 in third party liability coverage, a lender may require that you purchase $300,000 in third party liability, as well as optional coverage like collision or comprehensive car insurance. The more coverage you purchase, the higher your car insurance rates will be.

Car insurance for a used car

The opposite of a new car, buying a used car can actually lower your insurance premium. This is because used cars tend to be lower in value, which means it won’t cost the insurance company as much money to repair or replace them if something goes wrong. In addition, since used cars are cheaper, you may not need to take out a loan to fund your purchase, which means you can choose the coverage you want. This may translate to less coverage than what a lender would have required of you, which could make your policy even cheaper.

That said, there can be drawbacks to purchasing a used car and it’s important to do your research beforehand. For example, while you will likely save money on car insurance, you may spend more on gas with older cars being less fuel-efficient.

New car vs. used car insurance

It’s important to note that there are no policies designed specifically for new vs. used cars. However, the insurance company will ask for several details about your vehicle, including the make, model, and year. Understanding how these factors influence car insurance rates is crucial. Ultimately, insurance providers use the type of car you drive to determine your risk level, which directly affects your premium. Higher risk usually translates to higher premiums. When an insurance provider assesses the make and model of the car you drive, they consider the car’s overall safety ratings, potential repair or replacement costs, and relevant data, like claims and theft rates.

The make and model of the car matter because they help determine the value of your car. Each vehicle has distinct trim levels or features, body styles (e.g. sedan, coupe, hatchback, SUV, etc.), and finishes. Some vehicles also have unique add-ons, like four-wheel drive or larger engines, further impacting the cost of auto insurance. Lastly, the year the car was made is also important because vehicle designs, even among the same models, can change significantly from year to year.

A general rule of thumb for car insurance is that newer, more expensive cars cost more to insure than their used or inexpensive counterparts. The reason for this is that these cars cost more to replace and their parts cost more to repair in the event of damage. Plus, they may be at a greater risk of theft. Therefore, one way to reduce car insurance costs is by choosing a new car with a high safety rating or equipping your vehicle with anti-theft devices, such as security systems.

If you are deciding whether to purchase a new car, research the safety rating and claims and theft rates for all potential candidates. We also recommend contacting BrokerLink to learn more about how insurance rates are impacted by new cars. We can also provide a free car insurance quote.


New car insurance coverage

Mandatory car insurance requirements are the same, whether you drive a brand-new Tesla or a used Honda. However, if your car is higher in value, you may be inclined to purchase a higher coverage limit or additional coverage. As mentioned above, if you lease your new car, your lender may require you to purchase coverage beyond the minimum. To learn more about the insurance coverage for drivers of new vehicles, we outline each type of available coverage below:

Third party liability coverage

Third party liability coverage protects drivers if they get into an accident that they are at fault for. For example, if you cause a collision that results in bodily injury or property damage, liability coverage can help you cover the costs of medical expenses or vehicle repairs. It can also help pay for court fees or legal counsel, if necessary. Provinces have different minimum requirements for third party liability coverage. For example, in Ontario and Alberta, drivers must hold a minimum of $200,000 in third party liability coverage at all times.

Direct compensation - property damage coverage

Direct compensation - property damage coverage protects the policyholder in the event that they get into an accident that was not their fault. This type of coverage offers compensation if you suffer an injury or your car is damaged in the accident. In the case of direct compensation, the insurance company may reimburse the policyholder directly for their claim.

Accident benefits coverage

Accident benefits coverage can help cover the costs of medical expenses following a collision. This type of coverage is mandatory and can be claimed no matter which party was at fault for the accident. It can help pay for the medical expenses of the driver, passenger, or any pedestrians involved in the collision. Examples of medical expenses accident benefits can cover include rehabilitation, prescription medications, and physical therapy.

Uninsured automobile coverage

Uninsured automobile coverage protects you and any passengers in your vehicle if you’re involved in an accident with an at-fault driver who is uninsured or underinsured. This mandatory coverage type may also protect against hit-and-runs.

Collision coverage

Collision coverage protects the policyholder if they get into an accident with another vehicle or object on the road, no matter who is at fault for the accident. It is optional but might be worthwhile for new cars. Under the collision coverage section of your policy, you can receive compensation to help pay for any property damage that resulted from the accident, such as a damaged car in need of repair.

Comprehensive coverage

Comprehensive coverage aims to protect drivers from non-collision-related circumstances. For example, if your new car is damaged by an insured peril, like theft, vandalism, falling objects, water damage, or fire and you added comprehensive coverage to your policy, your insurance company can help cover the cost of repairing or replacing your vehicle. Comprehensive coverage is especially popular among those who drive new and expensive vehicles.

Accident forgiveness coverage

One final type of optional car insurance coverage popular among drivers is accident forgiveness. Accident forgiveness is additional coverage that can be added to your car insurance policy as an endorsement, to protect your driving record and to help prevent your insurance premium from increasing if you have an at-fault accident claim.

Note: coverage varies by province.

Other factors car insurance companies use to determine rates

Now that you know a bit more about how the make and model of the car you buy can impact your insurance rates, let’s consider the other wide range of factors that impact insurance premiums. Ultimately, if you want to keep car insurance rates low, it’s important to understand how the other factors come into play. Keep reading for a full list of factors impacting car insurance rates, beyond vehicle type:

Driving history

Driving history is perhaps the most important factor when it comes to car insurance premiums. A person’s driving history is their experience coupled with their driving record. Having more driving experience is usually a good thing, however, only if you have a clean driving record to go with it. A clean driving record is one that is free from accidents, traffic tickets, and other incidents. A clean record indicates that you are a safe and responsible driver who is less likely to get into an accident. If you maintain a clean record for a certain number of years, your insurance company may lower your premium accordingly. Alternatively, if you have a poor driving record, your insurance company may have grounds to cancel your policy, which could leave you with no other option than purchasing high-risk insurance.


Age is another factor that has a significant impact on your auto insurance rate. From an insurance company’s perspective, there is a direct correlation between age and risk level. They believe that the younger a driver is, the less driving experience they have, and the greater their chances of getting into a collision. This is why drivers below the age of 25 typically have the highest car insurance rates in Canada. Conversely, another age group impacted is seniors of a certain age, who may have a higher premium.

Local laws

Local laws can also influence the cost of car insurance in Canada. Since car insurance is regulated provincially, each Canadian province and territory has its own auto insurance regulations. These regulations include the minimum coverage requirements. The more comprehensive coverage required by your province, the more expensive your insurance will be. For example, Ontario and Alberta require that all drivers carry a minimum of $200,000 in third party liability coverage at all times, compared to the $500,000 in third party liability coverage that Nova Scotia drivers are required to carry.


Location is another factor that can majorly affect your auto insurance premium in Canada. When calculating your car insurance rate, an insurance company will ask for your address. They may also ask for the addresses or regions in which you typically drive your car, such as the address of your office if you commute to work. This is because where you drive your car also indicates your risk level. Drivers who live in populous urban areas with more traffic are more likely to get into accidents, and their insurance may be higher accordingly. In contrast, drivers who live in rural parts of the province with less traffic are considered less likely to get into accidents and may receive a reduced rate. Furthermore, if you live or work in a part of the country prone to climate related incidents, such as floods or wildfires, or in an area with a high crime rate or high rate of claims, your insurance premium can also be impacted.

How frequently you drive your vehicle

How often you drive your vehicle is another factor insurance companies consider. Spending an above-average amount of time on the road (e.g. if you drive for your job) usually translates to higher premiums than if you spend a below-average amount of time behind the wheel (e.g. if you only drive a few days each week). Additionally, if you frequently drive your car at night or on major highways (which can put you at higher risk of an accident), your insurance rate can also be impacted.

Marital status

One last factor that affects car insurance rates in Canada is marital status. Research suggests that married people are more responsible and financially stable, which insurance companies may take into consideration when calculating auto insurance premiums.

Please note that insurance companies determine insurance rates in Canada, not insurance brokers. Insurance brokerages like BrokerLink do not set insurance premiums. That said, BrokerLink can offer our unbiased advice and help you find the best coverage at the most competitive rate. We can highlight discounts you didn’t know you were eligible for and shop around on your behalf. To speak with an experienced insurance advisor today, contact BrokerLink.

Get in touch with BrokerLink for more information

At BrokerLink, we are car insurance experts, which means we can explain how a new car will impact your insurance rates.

Whether you want tips on how to keep insurance rates low or are looking for a free online quote, we are here. Answer a few basic questions about yourself and your new vehicle, and you will receive an accurate and competitive car insurance quote in as little as five minutes.

Give us a call, send us an email, or visit us in person today.

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