Ask an Agent: What Should I Know About Buying Insurance for a New Car?

The Ask an Agent series answers popular questions about car insurance with expert advice from AAA Insurance agents. In this installment, agent Benjamin Castañeda offers coverage tips for financing or leasing a new car.

I’m buying a new car. When should I get auto coverage?

Castañeda: The best thing is to do it at the same time you sign the paperwork to purchase the car, so that when you drive off the lot, you have coverage. If you have a car in mind, dealerships love, love, love to give you the VIN [vehicle identification number] because to them, it means it’s a sale. And for us, it’s easier to get you quoted and add your new car onto your policy when you have that number.

What happens if I wait to buy auto coverage?

Castañeda: There is a clause [in your current auto policy] that extends coverage to your new car. However, that doesn’t mean it’s going to cover what you need. Let’s say you have an old 1996 Pontiac Grand Am and you upgrade to a 2020 Honda Civic. On your Grand Am, you might just have liability [coverage for a $2,000 car]. If you have an accident when you drive your new Honda off the lot and that vehicle gets totaled on your first day out, you’ll be responsible for the full damages.

What is gap insurance?

Castañeda: Gap insurance covers the difference between what your car is worth and what you owe on the loan. So, if you buy the car for $20,000 and a crash totals your car, it might be worth $15,000 and you’ll still owe $5,000. Gap coverage pays off that $5,000; your loan is back at zero. It’s definitely something you’d want to have anytime you’re financing a car. If you feel that you don’t need it because you could pay off the vehicle at any time, that would be your decision.

Should I get coverage for original equipment manufacturer parts?

Castañeda: For any brand-new vehicle, I recommend OEM [original equipment manufacturer] parts coverage for at least three years. Yes, we can find secondhand or third-party parts that could possibly fit your car. The downside is they aren’t always exact.

If you’re leasing a vehicle, you should have OEM parts on it 100 percent of the time. While you’re leasing, you’re essentially renting that car from the dealership. If that vehicle does not have original parts when you return it to them, you will break your contract and you’ll end up paying a fee on top of whatever it costs for the original equipment to be added.

About the Agent

Benjamin Castañeda, based in Salt Lake City, was one of the original agents on hand at the AAA Member Service Center when it opened in 2015. He has seven years of experience as an insurance agent.

• Nickname: Benji, just like the dog!
• Hobbies: Playing musical instruments and cooking.
• First car: 1996 Pontiac Grand Am.
• Dream car: 1970 Stingray Corvette or 1964 Chevy Impala Convertible Lowrider.
• Best job perk: Talking to people and getting to know them.
• Best advice received: Money comes and goes. Memories last forever!

How to contact AAA Insurance agent Benjamin Castañeda:

AAA Salt Lake City Foothill Branch

1400 S. Foothill Dr., Ste. 116

Salt Lake City, Utah

(801) 238-1250

[email protected]

Provides assistance in English, Spanish, and Portuguese.

Read more Ask an Agent articles:

• Can I save on car insurance if I have a teen driver at home?
• Can college-age drivers save on car insurance?
• How can I save on my car insurance?
• Is pay-per-mile auto insurance right for me?
• How do I talk to my parents about their driving?
• Does my insurance cover holiday gifts stolen from my car?
• Does the type of car I drive affect my insurance rate?