If you're in the market for a vehicle, purchasing new will offer you the certainty of no accidents, the latest technology and safety features, and maintenance and warranty perks that will keep your investment operating at premium efficiency for years to come. Banks also offer lower financing rates on new vehicles, making buying new an appealing option.
New vehicle replacement cost coverage is a smart choice for those purchasing a new car. This policy means that if your new vehicle is in an accident and damaged beyond repair, you will be paid the sum you originally bought the vehicle for, not the depreciated value.
This type of insurance is a sound financial move for those who want to protect their investment.
Let's consider, for example, New Vehicle Replacement Plus coverage from ICBC. Under this policy, if your new vehicle is damaged over 50 per cent of its market value or more, it is considered a write off. Under the New Vehicle Replacement program, you will receive the full replacement value in the form of the newest possible make and model of your vehicle, a different model, or a cash payout.
According to ICBC, if your car is a total loss, your deductible will be reimbursed and ICBC will replace your vehicle with the most current model if the replacement can be delivered 30 days from the date your car was written off.
If a replacement vehicle cannot be delivered within this time, ICBC will give you a cash payout equivalent to the purchase price of your vehicle, or the manufacturer's suggested retail price at the time you bought your vehicle, whichever is less. Added to this will be an additional mark-up for inflation: 2.5 per cent for vehicles in their first model year and five per cent for vehicles in their second model year.
If a replacement vehicle is available, but you would prefer a different model, ICBC will pay you the cost of this model up to what you paid for your previous vehicle.
Normally, replacement cost policies are sound financial investments when buying a new vehicle; however, one of our New Car Dealer members recently ran into a problem with this type of insurance which had unfortunate repercussions for their consumer.
The customer had purchased a vehicle at the retail price minus a $500 discount and financed the vehicle, so they did not receive cash incentives offered by the manufacturer on the purchase.
Unfortunately the customer's car was written off, but they had invested in the New Vehicle Replacement coverage. When the insurance paperwork dust settled, ICBC said it would only pay out the customer the purchase price of a new vehicle at $500 over invoice. However, this purchase price would include cash incentives, despite the customer not having access to them when they chose to finance.
It's obvious this method of payout if unfair to both the customer and the dealership, and not in the spirit of the intent of this premium insurance policy. It's not acceptable that the customer is being paid out at the price of the new car with the cash incentives factored in when the customer didn't have access to those incentives. Even though they paid for replacement coverage, they won't be able to replace their old vehicle with the exact make and model.
I hope this policy is reviewed and this loophole closed. Ultimately, buyers and dealers need to be fully aware of some of the consequences with purchasing the replacement policy. Everyone deserves fair treatment when working with vehicle insurance.
Blair Qualey ispresident and CEO of the New Car Dealers Association of BC. You can email him at [email protected].
