Can I Get Insurance on Used Cars?

Can I Get Insurance on Used Cars?

Buying a used car can help you save money, but if you have an accident and your insurance isn’t up to scratch, those savings could disappear fast.

There’s no special insurance just for used cars; it’s the same as what you’d get for a new car. However, the cost can vary, and you might need different coverage.

To make sure you’re not caught short or paying for extra insurance you don’t need, it’s important to understand how insurance for used cars works, what drives the costs, and which types of coverage are right for you.

What is used car insurance?

Just as we said, insurance for used cars works the same as new car insurance; there isn’t a special type just for used vehicles. But before you can legally drive your used car, you need to have it insured.

Your auto insurance will likely include several types of coverage. Some are mandatory, like basic liability insurance, and others are optional, like collision and comprehensive. Let’s break down the most common coverages in a Canadian car insurance policy:

Third-party liability coverage

Liability coverage is mandatory car insurance coverage for everyone in Canada who drives a vehicle. This essential coverage covers costs if you cause injury to someone or damage their property with your car.

Accident benefits coverage

Also mandatory across Canada, this provides benefits to cover medical expenses and lost income if you’re injured in a car accident, regardless of who caused it.

Direct compensation-property damage coverage

In provinces with no-fault insurance, such as Ontario and Nova Scotia, this covers damage to your car and its contents and for loss of use of your car when another driver is at fault.

Uninsured motorist coverage

Mandatory in only select provinces, this protects you if you’re involved in an accident with an uninsured driver or a hit-and-run.

Collision coverage

This optional coverage helps pay for repairs or the replacement of your car if you’re in an at-fault accident.

Comprehensive coverage

This optional coverage protects against damage to your car from things unrelated to a collision, like theft, vandalism, or natural events.

How much is insurance for a used car?

Generally, used car insurance costs less than for new ones, mostly because insurance that covers damage, like comprehensive and collision, depends on the car’s current market value. As a car ages and its value drops, it’s cheaper to insure because it would cost less to fix or replace.

Furthermore, while you might get a break on costs like comprehensive and collision for an older car, you might not need these coverages if your car isn’t worth much anymore, meaning cheaper insurance.

But there’s a catch with older cars—sometimes parts are hard to find, like for a used classic vehicle, or they might not have the latest safety features, like forward collision warning, automatic emergency braking, or even backup cameras. This can actually make car insurance rates a bit more expensive because the insurance company sees the increased risk associated with your vehicle.

Also, the age of your car isn’t the only thing insurance companies look at when they set your rate. They also consider:

  • What type of car you have
  • Your driving record
  • Where you live
  • Your age and gender
  • The kind of coverage you want
  • Your liability and deductible limits
  • Your credit score (in select provinces and territories)

Do you need full coverage for a used car?

Full coverage insurance isn’t just about covering damages you cause to others; it also includes collision and comprehensive coverage. These help pay for repairs to your own car after you pay the deductible, but only up to what the car is currently worth.

For a used car, especially if it’s older or has seen better days, its value might have dropped a lot. In that case, paying for full coverage might not make sense anymore. It’s like paying for more protection than the car is actually worth.

While you always need at least the basic liability insurance required by law, deciding if you need full coverage on a used car depends on a few things:

The value of your vehicle

If your used car still has a good value or is pretty new, getting full coverage—including collision and comprehensive—might be a wise choice as it helps cover repair costs or even replace your car if it’s damaged in an accident or something unexpected like theft or a natural disaster.

Whether you’re financing or leasing

If you’re paying off a loan or leasing your used car, your lender will usually require you to have full coverage. This is their way of protecting their investment while you’re still making payments.

How much risk you can handle

You also need to think about how much financial risk you’re comfortable with. If shelling out for major repairs or replacing your car would be tough without insurance, full coverage can really help ease those worries.

The cost of coverage vs. the car’s value

Check how the cost of full coverage stacks up against your car’s current value. If the cost of the insurance plus your deductible (the amount you pay before your insurance starts to pay) is almost as much as, or more than, your car’s worth, it might not be worth it to get full coverage.

What if my used car is a classic or specialty car?

If you’ve bought a used classic or specialty car, you may need to ask your insurance company about getting classic car insurance. This insurance is designed for cars that are at least 25 to 30 years old, but it can also cover special newer cars like limited editions or exotic cars. These vehicles are usually for cruising on special occasions, not your daily commute.

While standard car insurance pays based on a car’s depreciating value, classic car insurance lets you and the insurer agree on the car’s worth upfront. If your car is completely wrecked, you get paid this agreed amount, not just what the car is worth at that time.

As old cars might need pricier, harder-to-find parts and expert repairs, this insurance usually covers costs at specialized shops that know their way around vintage cars. Plus, it often includes extras that car collectors appreciate, like coverage for spare parts, collectibles, or the cost of specialized towing to avoid wear and tear during transport.

How to get cheaper insurance on a used car

Getting cheaper insurance on your used vehicle involves similar steps to getting cheaper auto insurance in general but with a couple of differences:

Shop around

As with any type of car insurance, don’t settle for the first quote you get. Check out different insurance companies to see who offers the best deal. There are plenty of online tools that make this easy.

Pick a cheaper-to-insure used car

Some cars are just less expensive to insure because they cost less to fix or they’re safer. Before you buy, find out which cars have lower insurance costs.

Trim your coverage

If your used car isn’t worth much, you might consider dropping collision or comprehensive coverage. A good rule of thumb is that if the annual cost of coverage is more than 10% of your car’s current value, it might not be worth it.

Ask about discounts

Ask your insurance company or broker about any discounts you may qualify for. Many insurers offer discounts for safe driving, having multiple policies (like your home and car), or even having an anti-theft system in your car.

Frequently asked questions

How does insurance work for second-hand cars?

Insurance for second-hand cars works just like it does for new cars. You need to have at least the minimum required liability insurance to drive legally.

Which insurance is best for a second-hand car?

The best insurance for a second-hand car depends on the car’s value, your budget, and how much you use it. Consider comprehensive and collision if the car’s value justifies it, or stick to liability if the car is older and not worth as much.

Is insurance cheaper on a second car?

Often, yes. Many insurance companies offer a multi-car discount if you insure more than one car with them, which can make insurance for your second car cheaper.

Can I drive a car without insurance if I just bought it in Canada?

No, you cannot legally drive a car without insurance in Canada. You must have insurance set up before you drive the car.