Car Insurance Premiums For New Car Vs Used Car 2024

Updated On: 2023-04-21

Author : Team Policybachat

In some parts of India, the car is considered out of reach for many people. Buying a car might be an indication of social standing or may signify that someone has lived a certain life in their community. This is because the number of first time car buyers has increased in the last decade or so. Thanks to a rise in purchasing power, an easy buying process, and lots of options for insurance.

There are a lot of questions involved in the process of buying a car, but the first question you need to ask is whether you want to buy a new or used one. We break down the advantages for both below. Disputes happen from time to time but as in this case, the stuff on the new site is usually more beneficial. Ultimately it'll boil down to what you need for your specific needs.

Table of Contents:

Advantages of New Car vs Used Car:

New Car Used Car
No Need to worry about the past because it is a new car (Reliability) It’s easier than ever to explore a car’s history
Easy to Buy Less Expensive
New Car Deals Lower Depreciation value
Cheap to Insure Better Car Models
Latest Safety Technology The best option for learner drivers
Low Maintenance The Insured Declared value is low
More Fuel Efficient Cheaper to repair used cars
Full Warranty Coverage It’s a good choice for the short term

Disadvantages of New Car vs Used Car:

New Car Used Car
Expensive compared to Used Cars No Protection
High car insurance premium Fuel Efficiency
High Depreciation Rate No warranty cost
No need to pay the registration fee, road taxes, etc. High maintenance cost
Costlier to insure Unreliability

How to Calculate the Car Insurance Premium for New Car & Used Car?

The car insurance premium is calculated online these days with the help of computers and other digital equipment. In the starting days of insurance, the premium calculation was done manually and was given in writing.

These days digital equipment has taken over the manual calculations where you need to input the data of your car such as Make, Model, Manufactured date, and other factors to get the premium. The car insurance premium calculators are equipped with the formulae and once the data is input, the premium is displayed on the screen.

Car insurance rates for used cars and new cars can be calculated online and the details to be submitted for used cars are the transfer of ownership details apart from the basic details such as Car type, fuel used, place of registration, date of registration, etc.

As we know, car insurance premium calculation has two sections namely the own damage section and the third party section. The premium for the third party section is determined by the IRDA and constant across all the insurance companies. The own damage section rates are also decided by the Indian Motor Tariff and the insurance companies can decide the premium rates based on the tariff rates.

The first party car insurance is an agreement between the insured customer and the insurance company in which the insured pays a premium and claims for any damage from the insurance company. The car insurance premium calculations are easy these days, and let us understand how the car insurance premium calculation is being done:-

Car Insurance Premium Calculation for New Car vs Used Car:

The premium for a new car would be greater than that of a used car. This is due to the depreciation being taken into account. The depreciation is the result of wear and tear of the vehicle parts due to the usage of the car.

There are a lot of things that decide the premium of the car and are discussed in the earlier article Car Insurance Premium Calculation. It mentions the different factors that are used in the premium calculation. Overall the premium of the car depends on the below factors and changes with the age of the car. For a new car, the premium would be higher compared to that of a used car.

Factors New Car (Less than 1500cc) Renewal (Less than 1500cc)
Manufacturing Year 2020 2019
Ex-showroom price Rs. 5,00,000 Rs.5,50,000
Depreciation 5% 20%
IDV Rs.4,75,000 Rs.4,40,000
OD Premium Rate 1.560 % 1.650 %
OD Premium Rs.7,410 Rs.7,260
No Claim Bonus Discount 0% 20%
Total OD premium after discount Rs.7,410 Rs.5,808
Third party premium Rs.3,221 Rs.3,221
Compulsory PA Owner Driver Cover Rs.325 Rs.325
Total TP Premium Rs.3546 Rs.3546
Net Premium Rs.10,956 Rs.9,354
GST 18% Rs.1,972 Rs.1,684
Final Premium Rs. 12,929 Rs.11,038

Factors Effecting Car Insurance Premium:

Below are factors that determine the car insurance premium calculation;

  1. Make & Model: The make and model of your car determine the premium charged by the insurance company. Some make models are charged a higher premium due to the repair costs involved with that particular model. The cost of parts to be replaced or repaired is higher for some makes of cars which results in a higher premium.
  2. Cubic Capacity: The cubic capacity of the car also determines the premium. The higher the cubic capacity, the higher would be the premium of the car. Cubic capacity is the size of the engine and the power produced by the engine. There are three classifications for cubic capacity: Less than 1000cc, exceeding 1000cc, and not exceeding 1500cc, exceeding 1500cc.
  3. No claim bonus: The No Claim Bonus is given to the drivers who do not make any claim in the previous years of insurance. The NCB bonus is given in 5 slabs and ranges from 0% to 50% for each claim free year. The NCB discount is applied to the own damage premium before arriving at the final premium. The higher the NCB, the lower would be the premium.
  4. Manufacturing Date/Registration Date: The Date of Manufacture or the Date of registration is taken for the premium calculation to determine the age of the vehicle. Some insurance companies take the manufacturing date for determining the age of the vehicle while some insurance companies take the registration date to determine the age of the vehicle.
  5. Fuel Type: The fuel used in the car is also considered while calculating the premium for the car. In most cases, diesel cars are charged higher compared to petrol cars. This is due to the loss ratio experienced by the insurance companies, the loss ratio of diesel cars being higher than that of petrol cars.
  6. Zone: For insurance, India is divided into 2 zones namely Zone A and Zone B. Zone A consists of the State capitals and Metropolitan cities while Zone B consists of the other places excluding those in Zone A. This is due to the experience that the cars in Zone A are more prone to accidents compared to the cars from Zone B.

Visit policybachat for your car insurance calculation premium and get the best car insurance premium quotes from the list of top general insurance companies at the best price.

Which is a better option Used Car vs New Car?

One of the main reasons to consider a second-hand vehicle is that it costs less than a new car. In other words, the value for money proposition is relatively high, provided you manage to buy a used vehicle that is in good condition.

But is it a good idea to go for such an option? To understand which a better purchase is, you need to look at the difference between the key parameters of both types of cars. Refer to the table below for the key differences between an old car and a new car.

Parameter New car Used car
Car insurance premium High Low
Buying cost (Price) High Low
Maintenance cost Lower than a used car Higher than a new car
Reliability High Low
Features and technology You get the latest features and technology It misses out on the new technology and features
Warranty It comes with a manufacturer-provided warranty package It May does not have warranty coverage depending on the age of the vehicle
Overall running cost Low, due to less maintenance, higher fuel efficiency, and reliability High, due to the maintenance costs, low reliability, and lower fuel economy

Reasons to choose a used car over a brand new car: Benefits of Buying a Used Car!

1. Depreciation of a used car is much lower than a new car:

When you buy a new car, one of the biggest costs that pop up is depreciation. The moment you drive it off the lot and clock some distance on the odometer, depreciation will be close to 20-25% of the initial car value. The percentage of depreciation or the rate of depreciation for a used car is much lower than for a brand new car because the primary depreciation of around 20-25 percent is already deducted when it’s sold.

Consider buying used cars if you’re feeling the pinch and want to keep your monthly car payments low. They can provide a longer-lasting and satisfying car experience without breaking the bank! With manufacturers launching new cars, face-lifts, and limited editions every few months, consumers are constantly upgrading to newer cars and selling their old cars within a year of purchase.

2. Cost-efficient safety & luxury as good as a new car: Most cars produced in the last 5 years have standard safety features like airbags, ABS, and reverse parking sensors which are the primary things a consumer needs in his or her car. When it comes to the interiors these cars have a decent music system with USB, Bluetooth, and AUX connectivity. If you’re lucky you might also find a used car with additional accessories such as an amplifier, sub-woofers, leather seats, reverse camera, and touch-screen infotainment installed by the owner. Why spend more when you can avail the features of a new car in a good condition pre-owned car?

3. Insurance cost is cheaper than a new car: One of the main benefits of a used car is cheaper insurance costs, the premium amount of insurance reduces with the age of the car. The premium is calculated by the depreciation of the car when you sell or buy a car. The premium amount of the insurance is recalculated during the transfer of ownership which results in cheaper car insurance.

4. the Best choice for Learner Drivers: Used cars are undoubtedly the best choice for a learner driver or a beginner. A few scratches or dent is quite common when you begin to start driving and it is wise to go buy a new car once you’re thorough with driving and confident to take on the crowded Indian roads.

Frequently Asked Questions:

Is a new car worth buying?

Yes, a new car is worth the money as it provides you with the experience of owning a brand new vehicle. On top of that, you get to experience the latest technology, new features, and superior performance.

Is it better to purchase an affordable new car or an old premium car?

The decision depends on your needs. You can opt for an old, premium car if you're looking for a luxury vehicle or something high-end. It's worth remembering that maintenance costs will be higher though and also the running costs.

Should I buy a new car or a used car in the long run?

This will depend on the type of car you want to buy. Generally, if you want a safe, new model, then you should get it with a warranty. However, if you buy one that’s in really good condition and it’s not a high-end make then you might be able to get a good deal.

So, there's a catch. Do you know enough about cars that you could tell whether or not it was a good investment? Even if it's a good make, there's no guarantee the previous owner wasn't doing donuts in the parking lot of Best Buy late at night.

Over time, a new car could cost less to maintain. All vehicle parts have a lifespan, which means eventually you will have to replace them (unless you are prepared to fork out more money).


It's a good idea to compare insurance policies for both new cars and used ones. You can benefit from our renewal offers and discounts, which will allow you to ensure the best deal for your vehicle. This also includes getting a sufficient level of coverage to provide peace of mind in the future.

If you prioritize the latest technology and spend more time using your car than driving it, then a new automobile may be for you. And if it's about seeking peace of mind as much as anything else, buying an assured automobile will give you the strongest assurance. One exception is if you choose a certified pre-owned car that has a warranty. If you prioritize a low price and good value, buying a used car may be the better bet.

When you're researching car insurance, it makes sense to do a comparison. This way, you will be able to get hold of the most optimum policy that offers maximum coverage at a fixed cost. Also, remember to get sufficient coverage for your vehicle so that you do not end up in a financial crisis in the future.

Buying a car is a serious commitment. While it may be a depreciating asset, which means that the car value decreases over time, it should still make sense in the long run. A good car will have more than just great horsepower and top speed. Great attributes to look out for include serviceability, reputation, car insurance cost, and resale value whether it is a new or used car.

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