Is Gap Insurance worth taking out on new ish car?

Tracyk_2

Im just about to purchase a 3 year old car and the dealers are all mentioing Gap insurance.
Arnold Clark are charging £199 for 3 years.
Is this an insurance worth taking out and are there any pitfalls?

sweep9

Personal preference... I've got it and had it previously.

Say you spend £10k on a car over 5 years, if the car is written off after 3 years due to an accident, imagine if the insurance company offer you £2k for it as that's the current market value. The GAP will make up the 8k for you, meaning you can go out and get another car for £10k whilst still only paying the finance on the original £10k for the remaining 2 years.

InsideInsurance

1) There are many types of GAP insurance and what they will cover. Some will give you back the gap between write off and the original invoice price were as others "only" cover the shortfall between settlement and the outstanding finance

2) There is a wide range of quality of cover, in particular in if the insurance does the gap between what you've actually received or what they believe your car was worth (unsurprisingly these insurers tend to be more optimistic than car insurers)

You can buy GAP insurance from many different providers so shop around first. A few years ago when I did some work for an insurance intermediary the margins on GAP from car dealerships were stupidly high - they could make more money selling GAP than they did from selling the car

Tracyk_2

Do I need it if I am paying cash for the car rather than financing it?

BJV

Gap Insurance is worth while even more so if you are paying cash.

There are legal reasons that your dealership will never be as cheap as some of the online gap insurance providers. As is you but gap insurance directly from the dealership that you are buying your car from they are legally bound to charge you insurance premium tax ( like vat on insurance ) @ 20%. If you buy independently this is just 6 %.

So when it comes to gap insurance the price you are paying is not always a real reflection of quality.

The whole idea is that if something happens to your car and it is written off then you are not left with only the depreciated cost of your car to use to replace it.

If you are paying cash well that is easy as you do not need to worry about protecting any finance agreement instead it is you hard earned cash that you are looking after.

The first level is called return to invoice but depending upon the supplier they may call it something different. Basically your own insurance company gives you what your car is worth in the day and your gap policy tops you back up to the invoice price.

The second level vehicle replacement is slightly more difficult to understand. With inflation car costs tend it increase over a period of time. This means that even getting all your money back may not be enough to buy the same car again. Vehicle replacement therefore tops you back up to the amount you need to spend to buy another car the same age mileage and condition as yours was on the day you bought it.

Couple of thing to check first

If it is a new car then your own motor insurance company may offer new for old within the first 12 months. if they do then you should look at a deferred policy. At least that way you are not paying twice. Just Google it

Also check what is covered. Some policies limit the purchase price you have paid to a percentage of a guide price. Some also do not cover paint protection or even limit the number of extras.

Check who gets paid? Do you get paid or a dealership?

Which have done a review so it might be worth a read http://www.which.co.uk/money/insurance/guides/gap-insurance/

Also remember that it is your car and your choice and no finance house or dealership can make it a condition of sale.

Hope this helps

forgotmyname

I thought GAP only covered the car if on finance?

It pays the balance difference between the insurance payout and what you owe the finance company, Or what you paid for the car?

No?

InsideInsurance

That is the traditional finance GAP cover but there are the other classes which may also include traditional or not

beefturnmail

Personally I can't see much value in it - yes if your car is a write-off the insurance pay-out won't be enough to pay for a brand new car, but then your car is not brand new when written off -the insurance pay-out 'should' be enough to pay for an equivalent car to the one you had at the time of write-off.

Obviously this is a bit of a bummer if you write it off 5 minutes after driving off the forecourt, when it has already depreciated by a few £k, but then if this is concerning to you, the answer IMHO is not to get extra insurance, but to not buy new, buy nearly-new instead.

InsideInsurance

But if you go back to the origins of GAP it was about the finance, so not only did you receive what you almost certainly considered a low offer from the insurer but due to interest, early settlement terms etc you'd be in the position of no car, insufficient funds to buy the same thing again and a significant loan still outstanding.

The idea of RTI and VR added on top of the covering finance is a newer development in the product. Some people are happy to own a 5 year old car but not happy to buy a 5 year old car with an evidently unknown history etc

WLM21

I asked this question a few weeks ago, but in the end didn't go fr it.

Try ala.co.uk, for a very cheap price

CKhalvashi

forgotmyname wrote: »

I thought GAP only covered the car if on finance?

It pays the balance difference between the insurance payout and what you owe the finance company, Or what you paid for the car?

No?

Nope, I've just bought mine outright, and there's GAP on there of £47,480 (list price) and not the £41000 I paid for it.

Bearing in mind that 2 years/150k miles down the line means if it gets written off, I get a new one (I've got an XF Sportbrake, but you're looking about £13000 for an XF Saloon at 2/150, so about the same) then it's £35000-ish I haven't got to find. Bearing in mind I'm probably keeping this for 3 years, £495 really is worth the risk on 200,000 miles, as with my driving record, there's a 50% change of having a smash based on mileage alone.

CK