Gap insurance, is it worth it?

bodgerx

AnnieO1234 wrote: »

Be very careful. If gap insurance was so great and really did as one saleswoman for Ford put it to me recently for a cash purchase on a used car, "puts you back to the position you are in today when you leave the showroom" there'd be a helluva lot of cars being deliberately written off to claim it.

Be very careful, shop around, do your homework.

A bizzarre argument.

By this logic you would also have everyone claiming on lots of other insurances as well.

Reason it doesn't happen is that its called fraud.

Immers7

yes

I highly recommend Gap insurance for people buying on finance.

You would surprised how many people don't understand that the Comp insurance won't cover the full finance outstanding with the depreciation of a vehicle and they are still responsible for the outstanding amount.

Quite a few end up paying for finance on a vehicle they no longer have the use of due to the same being written off.

bsms1147

no

Let me waffle;

If your car is written-off, assuming you're fully-comp, you should get the value that your car was worth at the time it was written-off.

Imagine you bought a car for £10,000 on full finance and wrote it off a couple of years later. Your car is worth £6,000 at that time but there's £8,000 of finance remaining on it. Your insurance will only give you £6,000, so there's a shortfall between what you've received and how much you owe.

Or a 'gap'. And in theory the gap insurance covers that difference.

But wait. Why do you need to cover that gap?

You could take that £6,000 that your fully-comp gave you and buy the same model of car, of the same age, in the same condition as the one you just wrote-off. You now have a car worth £6,000, and still owe £8,000 on finance.

Think about it. You are now in exactly the same position as you were right before you wrote your car off. The fact you're in 'negative equity' on the car at that moment in time is something that would have happened whatever the situation.

So if you didn't have Gap insurance, you just use the fully-comp payment to put you back to the same position you were in originally. And you won't have had to pay out x amount per month for an unnecessary insurance.

So personally, no, it is not worth it.

Immers7

yes

bsms1147 wrote: »

Let me waffle;

If your car is written-off, assuming you're fully-comp, you should get the value that your car was worth at the time it was written-off.

Imagine you bought a car for £10,000 on full finance and wrote it off a couple of years later. Your car is worth £6,000 at that time but there's £8,000 of finance remaining on it. Your insurance will only give you £6,000, so there's a shortfall between what you've received and how much you owe.

Or a 'gap'. And in theory the gap insurance covers that difference.

But wait. Why do you need to cover that gap?

You could take that £6,000 that your fully-comp gave you and buy the same model of car, of the same age, in the same condition as the one you just wrote-off. You now have a car worth £6,000, and still owe £8,000 on finance.

Think about it. You are now in exactly the same position as you were right before you wrote your car off. The fact you're in 'negative equity' on the car at that moment in time is something that would have happened whatever the situation.

So if you didn't have Gap insurance, you just use the fully-comp payment to put you back to the same position you were in originally. And you won't have had to pay out x amount per month for an unnecessary insurance.

So personally, no, it is not worth it.

The pre accident value payment for the vehicle goes directly to the finance company to pay part of the finance off.

If you have £2000.00 remaining on finance. you wont get further finance for another car ( be it 6000.00 or less until you have paid off the initial finance off on the old car)

dacouch

bsms1147 wrote: »

Let me waffle;

If your car is written-off, assuming you're fully-comp, you should get the value that your car was worth at the time it was written-off.

Imagine you bought a car for £10,000 on full finance and wrote it off a couple of years later. Your car is worth £6,000 at that time but there's £8,000 of finance remaining on it. Your insurance will only give you £6,000, so there's a shortfall between what you've received and how much you owe.

Or a 'gap'. And in theory the gap insurance covers that difference.

But wait. Why do you need to cover that gap?

You could take that £6,000 that your fully-comp gave you and buy the same model of car, of the same age, in the same condition as the one you just wrote-off. You now have a car worth £6,000, and still owe £8,000 on finance.

Think about it. You are now in exactly the same position as you were right before you wrote your car off. The fact you're in 'negative equity' on the car at that moment in time is something that would have happened whatever the situation.

So if you didn't have Gap insurance, you just use the fully-comp payment to put you back to the same position you were in originally. And you won't have had to pay out x amount per month for an unnecessary insurance.

So personally, no, it is not worth it.

Definately waffle but not very correct.

As pointed out by Immers, the settlement from the Insurers will (Normally) go straight to the finance company who would then require the £2000 to be paid asap.

You would then need to buy a new car as well as arrange finance which would be front loaded with charges and interest.

Standard gap would have cleared the outstanding finance leaving the customer free to purchase a fresh car.

Back to Invoice Gap Cover would clear the finance and pay the difference between your Car Insurers settlement and what you paid for the car (The invoice price)

Vehicle Replacement Insurance Gap would clear the outstanding finance and arrange the replacement of your car with a like for like new car eg equivalent to the car as your originally purchased it.

The premiums for the above covers for a three year term would typically cost circa £150 so about £1 a week or about £4 a month. Unless you purchased the cover from the car deal in which case the premiums would be two or three times higher and you would get less cover (Ironically)

This type of cover is not for everyone but for those who do claim on it they will tell you it's money well spent. Unfortunately there are many people who if their car was written off and they had a Gap between claims settlement and finance who would not be in the position to clear the finance and buy a replacement car.

In my experience people who've a been in a situation where there is gap between settlement and finance will always buy Gap cover from then on

daveyjp

Finance gap is for those who are borrowing too much to buy a car.

Return to invoice is actually depreciation insurance.

Both are nice earners for dealers.