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Contract and Lease Hire Vehicles and Potential New for Old Insurance Problems

New-for-old is a feature of some fully comprehensive motor insurance products.


Cost implications of having to replace vehicles mean that although this was a standard feature of most insurance policies many years ago, it is now an added benefit only some insurers now offer.


The theory, in a nutshell, is if you buy a new car or van and it is written off within the first 12 months, your own insurance company will buy you a new one. Simple!


The problem is that when you source a new vehicle, lots of policyholders think that their insurance company offer it and that the new-for-old terms and conditions will apply to them when the reality is that you could be leaving yourself at risk.    Lease cars and new for old replacement motor insurance


Several reasons mean this is more complex than you think, especially regarding a vehicle you funded via contract or lease hire.


  1. Most insurance companies who offer this new-for-old cover do so on the understanding that you are buying a vehicle. Regarding a contract or lease hire vehicle, you are not purchasing the car. It will not and can never be yours. 
  2. You are relying on the fact that your finance company will accept another vehicle. What happens if they don't?
  3. There are often mileage restrictions that mean if you exceed the permitted mileage, the new-for-old cover will not apply.
  4. There can often be time limits; for example, a replacement vehicle has to be available within a set time frame. This time frame may be unachievable as with current supply chain issues, many cars regularly have a six- or twelve-month lead time.
  5. Usually, cover lasts for 12 months, which leaves you unprotected for any subsequent years.


The last and most crucial issue with new for old terms and a contract or lease hire vehicle is that gap insurance has strict time limits. Usually, this means once you have taken delivery of your lease vehicle, you must set a policy in place within a specified time frame.


Ultimately, if your motor insurance company offers this feature and you take advantage, then look for cover at the end of their new-for-old cover, you may no longer be eligible for a gap insurance policy.


We can not comment on your insurance company's terms and conditions. We always request that you contact them to discuss your motor insurance policy terms and conditions and how they may apply to your vehicle.


With a Total Loss Contract and lease hire gap insurance policy starting at under £100 for three years of cover, is it worth taking the risk?