Confused about GAP insurance

regency_man

Guys. I know how PCP works, and I know you don't own the vehicle.

I am putting down a substantial deposit on my next PCP purchase (£18,000) and I want to protect that capital, because the finance company always get first dibs on insurance pay outs. That's why I am getting 'Replacement Vehicle' GAP.

If my new vehicle is smashed up, lets say it cost £40k. I know that my Motor Insurance policy will pay out to the current value of the vehicle, lets say £20k, and they will pay it straight to the Finance company. Then the GAP insurance 'Replacement Vehicle' cover will kick in and pay the difference 40k - 20k = £20k (i.e. my capital) to the dealership towards a new vehicle - so I basically end up all square (actually a little up in this case).

My question arises around if I actually owe the finance company slightly more than £20k, can I take some of the GAP money that they have given to the dealer to pay off the PCP, or do I have to find that myself?

regency_man

rich13348 wrote: »

I think the bit you have been quoted has been badly written. The normal insurance will be paid to the finance company as they own the vehicle, although that's not what we are getting at. The GAP will pay out to the finance company directly for that and not to you, or the dealership of their choice.

It does seem very badly written, you're right, but that's the actual policy wording! It specifically references paying a dealership - not me, and not a finance company.

I've dropped them an email, hopefully they can clear it up. I'll report back.

thescouselander

rich13348 wrote: »

I think the bit you have been quoted has been badly written. The normal insurance will be paid to the finance company as they own the vehicle, although that's not what we are getting at. The GAP will pay out to the finance company directly for that and not to you, or the dealership of their choice.

Are you sure that's right? It doesn't sound right to me. If the car has been written off then surely the contract holder will only need to settle the finance so they could use the insurance payout to do this and they'd have the balance available to put towards the next car.

There's no reason the finance company would need compensating with the whole value of the car because a proportion of the value has already been paid through the deposit and monthly payments through the PCP agreement.


See here: https://easygap.co.uk/358/gap-insurance-and-pcp-finance

If you want to cover the original cost of the vehicle then an RTI Gap Insurance or Return to Invoice policy may be what you need. This will pay the difference between the vehicle's market value and the original invoice price you paid. You can then pay the outstanding finance settlement and whatever is left over is your deposit for your new vehicle. This may help if you have paid a larger deposit in the finance agreement and therefore would lose this with only Finance Gap Insurance cover.

rich13348

regency_man wrote: »

Guys. I know how PCP works, and I know you don't own the vehicle.

I am putting down a substantial deposit on my next PCP purchase (£18,000) and I want to protect that capital, because the finance company always get first dibs on insurance pay outs. That's why I am getting 'Replacement Vehicle' GAP.

If my new vehicle is smashed up, lets say it cost £40k. I know that my Motor Insurance policy will pay out to the current value of the vehicle, lets say £20k, and they will pay it straight to the Finance company. Then the GAP insurance 'Replacement Vehicle' cover will kick in and pay the difference 40k - 20k = £20k (i.e. my capital) to the dealership towards a new vehicle - so I basically end up all square (actually a little up in this case).

My question arises around if I actually owe the finance company slightly more than £20k, can I take some of the GAP money that they have given to the dealer to pay off the PCP, or do I have to find that myself?

Ok so looking at another website for replacement car GAP insurance, they will pay the difference between market value and list price, OR they will pay what is left to pay on finance DIRECTLY TO THE FINANCE COMPANY whichever is higher.

Also they will fund the new car paying that to the dealership. They will at no point say "Here you go regency_man here is 10 grand now go pay off the finance", because let's face it, some !!!!!! would take the money not pay finance and go to Barbados, then the finance company have no car to reposess because well it's now a cube of metal.

rich13348

thescouselander wrote: »

Are you sure that's right? It doesn't sound right to me. If the car has been written off then surely the contract holder will only need to settle the finance so they could use the insurance payout to do this and they'd have the balance available to put towards the next car.

There's no reason the finance company would need compensating with the whole value of the car because a proportion of the value has already been paid through the deposit and monthly payments through the PCP agreement.

Sorry maybe I didn't explain the properly, you do not know that the market value of the car paid by the insurance company will cover the finance completely, the GAP will pay off any outstanding finance that is still due and has not been covered by the normal insurance, if the amount of finance still due is higher than the original purchase price it all goes to finance company. If the purchase price is higher then the finance is paid off and the rest, up to the purchase price, goes to you.

If you have replacement car GAP they, the GAP insurer will use the remainder after clearing the finance and up to the invoice price to put towards funding a new car for you or one of the samilar age to the one you bought when you bought it if it wasn't new so you won't get any money back but you will get a new car.

If you only have invoice price GAP then the remainder goes to you to use as a deposit for a new car after finance is cleared.

thescouselander

I think it's highly unlikely the outstanding finance would be more than the purchase price for the car though.

To take the OP's example specifically:

Original purchase price - £50k
Car written off at £30k value with £35k outstanding on finance

So with RTI GAP the The insurance company would pay the finance company £30k and the OP would use the GAP payout to cover the £5k still owed on finance and would have £15k left for a deposit on a new car.

The difference between RTI and Vehicle Replacement GAP is that instead of using the Invoice Price as the benchmark for the gap to me made up they base the gap on the current list price for the car.

neilmcl

Nicely explained.

neilmcl

lostinheaven wrote: »

No that's not true.

I've assumed (using the OP's original hypothetical figures) that the purchase price of the vehicle is £50,000, the balance financed was a figure higher than £35,000 but that in two years time the amount remaining outstanding on finance is £35,000.

Of course, if the original amount borrowed was £35k, then the amount left on finance after two years would be lower than £35k... that's just a case of revising and recalculating but the principle in my example is the same regardess.

rich13348 deleted his post, guess he realised his mistake.

jimjames

regency_man wrote: »

If my new vehicle is smashed up, lets say it cost £40k. I know that my Motor Insurance policy will pay out to the current value of the vehicle, lets say £20k, and they will pay it straight to the Finance company. Then the GAP insurance 'Replacement Vehicle' cover will kick in and pay the difference 40k - 20k = £20k (i.e. my capital) to the dealership towards a new vehicle - so I basically end up all square (actually a little up in this case).

What is the chance of having a accident that writes off a £40k vehicle? It's not just getting smashed up but such a severe accident that the vehicle is totally written off.


I'd think that fairly low risk which is why I'd never take out gap insurance