If you replace, the old account will delete and then replace the account on your Mac, including everything in its home folder. If you rename, the old account will appear as a separate user on your Mac, with a separate home folder and login. In this example, John Appleseed is a macOS user account. If it has the same name as an account already on your Mac, you're prompted to either rename the old account or replace the one on your Mac.
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