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New-for-Old Car Insurance
New-for-Old Car Insurance
Written by
Kervin Mathew
Edited by
Ellie Garran
Reviewed by
Adrian BennettCompare car insurance policies the easy way
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Long story short
New-for-old cover is usually exclusive to comprehensive car insurance
Many insurers include it as a standard feature, while others charge extra. It kicks in if your car is written off or stolen.
It can save you thousands by helping offset depreciation
A new car can lose up to 30% of its value in the first year. With new-for-old cover you’ll get a brand-new replacement instead.
Strict eligibility rules apply to access the benefit
You generally need to be the first registered owner, keep mileage under set limits, and claim within one to three years of registration.
It costs more up-front but offers unmatched peace of mind
Premiums can be higher, but it saves you the hassle and expense of buying again if the worst happens.
What’s new-for-old car insurance?
First, let’s be clear on what it’s not: new-for-old car insurance is not a type of insurance like comprehensive car insurance or compulsory third-party (CTP) insurance. Here’s what it actually is.
A common feature of comprehensive cover
New-for-old car insurance, or new car replacement cover, is a benefit you can generally get with a comprehensive car insurance policy. Some policies might offer it as an optional extra, or it might even be a standard inclusion at no extra charge.
A convenient reset button (sort of)
If you were to buy a new car from a dealership and then it unfortunately became a total loss, new-for-old cover could kick in and replace it with a brand-new vehicle of the same make, model, and specification – provided some policy conditions are met.
A potential offset for depreciation
New cars start losing their value fast once they’ve been bought – as much as 30% in their first year. If the insured vehicle needs to be replaced in the event of a total loss, new-for-old cover is one way around this initial depreciation.
Can I get new-for-old car replacement cover?
New-for-old car replacement cover is generally available with comprehensive car insurance – either as a standard feature or an optional extra. However, it’s important to understand that certain conditions need to be met to make you and your car eligible for the benefit.
Generally, new-for-old cover can work for you only if:
- you bought the car as a new or ex-demo model (generally with less than 5,000 km driven) from a licenced dealer
- the total loss occurred within a specific period since the car’s registration date (e.g. one to three years)
- you’ve kept the vehicle’s mileage within a specified number of kilometres (e.g. 20,000 to 70,000 km).
So if you want to insure, say, a 10-year-old Ford Focus, that has a six-figure odometer reading, new-for-old replacement car cover won’t work for you.
The one thing to remember is that the eligibility criteria for new-for-old cover can differ between insurers, whether that’s to do with the car’s age, mileage, or even when you bought the policy. Read the policy’s product disclosure statement (PDS) to get the full picture on how its new-for-old benefit works.
Helpful tip
No doubt new-for-old cover is a nifty feature that could, under the right circumstances, get you out of a tough spot. While you might need to pay more for the benefit as an optional extra, you could save a few extra bucks by choosing a comprehensive policy with new-for-old cover as a standard inclusion. But even if you get it as an optional extra, there may be other ways to reduce your premium, like opting for a pay-as-you-drive or low-kilometre policy. Your best bet is to compare policies before you settle on one.
Adrian Bennett
General Manager for General Insurance
How does new-for-old car replacement cover work?
Put simply, the idea behind new-for-old car replacement can be pretty straightforward. If your new car is written off or stolen within a certain period, or before it completes a certain number of kilometres, your insurer might replace it with a similar make and model or pay you out for the replacement costs.
Fictional scenario: How new-for-old cover helped a soccer player tackle a total loss
After years of saving, Nafisa bought herself a brand-new hatchback (her first car!) to support her career as a full-time soccer player. Things went well for the first year or so, until after one of her training sessions she walked up to her usual parking spot to find her car missing.
After accepting the reality that her car was stolen, an absolutely gutted Nafisa called her insurer to report the foul play and cancel her insurance. She was relieved to be reminded that her comprehensive policy included new-for-old cover.
Happily, all Nafisa had to do was pay her excess and provide her insurer with proof that the car was stolen. Given that the car was relatively new and wasn’t driven all that much, it was an easy call for the insurer to replace the vehicle. Before she knew it, Nafisa was back behind the wheel and back on the pitch.
Without new-for-old cover, Nafisa might’ve still received a payout, but not before her insurer factored in the depreciated market value of her vehicle at the time it was stolen – which could’ve been a few grand less than what she bought it for. So all-in-all, what a save!
New-for-old cover might even replace most modifications and accessories you add to your vehicle, provided they’re legal and your insurer has agreed to cover them. Remember to read the product disclosure statement (PDS) so you’re clear on your policy’s new-for-old cover benefits.
Is it worth having new-for-old car replacement cover?
Here’s a fact: Once bought, a new car may lose 10–15% of its value as soon as it’s driven out of the dealership.1Budget Direct – Ultimate Car Depreciation Guide This figure may climb to between 20% and 30% over the first year of the car’s life.2Automotive Finance – Understanding Car Depreciation and How to Minimise its Impact And that could be thousands of dollars!
New-for-old car replacement cover helps remove this element of depreciation – at least on the car insurance side. Unfortunately, if you were to sell your car, you’d still have to deal with the depreciation factor.
Pros and cons of new-for-old cover
Pros
- Full car replacement or cash reimbursement
- Peace of mind in case of a total loss due to theft or a write-off
- Spares you the hassle of going through the buying process all over again
- Cover may include the replacement car’s stamp duty, rego, and compulsory third-party (CTP) costs
Cons
- Eligibility criteria such as car age, mileage, and ownership can restrict the benefits
- Premiums can be on the higher side – especially if the feature is an optional extra
- There’s a risk of settling for a cash payout if a replacement vehicle is not available
- Potential ‘buyer’s regret’ if the car survives its first years without becoming a total loss
Another positive to consider is that some comprehensive policies offer new-for-old cover as a standard inclusion, and you’d be getting the benefit without having to pay more for it – as you would if it were an optional extra. Some insurers may even provide you with a hire car while they sort out your claim, if your car was damaged by a third party and you have the contact and rego of the at-fault driver.
As always, get savvy with the policy’s product disclosure statement (PDS), as the limits, conditions and exclusions of new-for-old cover can vary between insurers.
New-for-old vs agreed value
An alternative to new-for-old replacement car cover could be going with an agreed value policy to protect your car’s value, but this would typically cost more. Bear in mind, you’ll also need to renegotiate your car’s agreed value with your insurer every time you renew your policy, and this might involve independent car valuations and other paperwork. So, while it’s not as convenient as new-for-old cover, an agreed value policy might be an option if you’re outside an insurer’s new-for-old car replacement window.
Frequently asked questions
Does new-for-old car insurance cost more?
If you’re comparing it to third-party insurance, then yes. New-for-old cover is only available with comprehensive car insurance, which falls into the most expensive category of car insurance. If you’re getting new-for-old cover as an optional extra on a comprehensive policy, you can also be sure that you’re adding a few extra dollars to your premium. But if you’re getting comprehensive insurance anyway and you find a policy that includes new-for-old cover as standard, then nope, you won’t need to pay a cent more!
How does new-for-old cover work if I bought my car on finance?
If your car is written off while on finance and has new-for-old cover, your lender may need to provide your insurer with written consent before your vehicle can be replaced or you can receive a cash settlement.
What if my car’s make and model is not available as a replacement?
When you make a new-for-old cover claim, there are a couple of ways this could go.
If a new replacement vehicle isn’t available in Australia within a certain timeframe, say 90 days, your insurer will pay you the amount it would cost to replace the insured car with a new one of the same make and model.
If the same or similar make and model is no longer available in Australia, your insurer may pay you the amount you originally paid to buy the insured vehicle.
Where do I find the best new-for-old car insurance policy?
You could look high and low for the best new-for-old car insurance, but the fact is, it depends on your individual circumstances. A good place to start, though, would be using our car insurance comparison tool to compare policies from a range of insurers that offer the benefit.
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