Gap insurance, how does it work?

guzzbuzz

Hi, im buying a car from motorpoint. It is less than 12 months old and i was offered gap insurance by the dealer, for £400 for 3 years.

I'm not buying this car on finance, im paying for it out right.

I've asked a few people about this with conflicting opinions.

Some people are saying gap insurance is ONLY for cars on Finance and if im buying the car out right (which i am) then it does not cover me? They are also saying the salesman is being sneaky and trying to scam me?

Some people are saying you CAN get gap insurance, even if the car is bought outright and it will cover me for 3 years and if it gets stolen, loss, damaged etc i will get back the FULL amount i paid.

So who is right?!

neilmcl

There are a number of types of GAP insurance available, and all will certainly be cheaper than the £400 the salesman is charging you. The main 2 types are Return to Invoice (RTI) and replacement GAP. RTI will pay the difference between any insurance payout for a total loss and the invoice amount you paid, Replacement GAP will pay out the difference to buy the exact model again. The latter is more useful for finance deals, particularly when you get a discount on your initial car purchase.

https://www.confused.com/gap-insurance

sheslookinhot

Google "GAP Insurance"

guzzbuzz

Is it ONLY for cars that have been bought via finance though?

That's what im asking, sorry if that wasn't clear....

DrEskimo

guzzbuzz wrote: »

Is it ONLY for cars that have been bought via finance though?

That's what im asking, sorry if that wasn't clear....

No it's the same principle regardless of how it was bought.

There is an argument that it is 'more' useful for those that buy with finance, as they can be left with a shortfall between what is still owed on the finance, and the pay out from their car insurance claim. It obviously goes on the assumption they won't have the funds to cover this shortfall, as they have had to use finance to buy it in the first place.

It just covers the 'gap' between whatever you paid (invoice) and what your car insurance pays if written off or stolen. In other words, it's insurance for the depreciation, so that in an event of a total loss, you are back to the same financial position as you were when you originally bought the car.

e.g.
You pay £10k for a car and it gets written off 2years later.
The insurance looks and book price is only £4k, so they give you £4k to buy another car. So you've lost £6k in depreciation.

If you had a GAP policy in place, then they would pay out the £6k shortfall and now you have £10k to buy another car, rather than just £4k.

Given that most insurance companies will give you under the true value (typically base it on book price), the relatively small cost (you will be able to find it for <£200 using online brokers, like ALA) does make it an appealing prospect as far as non essential insurance policies go.

The thing to consider is risk though. Only a very small proportion of cars are ever a total loss....

flashg67

guzzbuzz wrote: »

Is it ONLY for cars that have been bought via finance though?

That's what im asking, sorry if that wasn't clear....

Not necessarily - not a recommendation for this company but gives a useful explanation

https://www.click4gap.co.uk/gap/blogs/gap-car-insurance-and-buying-a-car-outright

AdrianC

"Vanilla" gap pays the difference between a write-off payout and your finance company's settlement. Basically, it ensures you aren't in negative equity and out of pocket when the car's written off. So, yes, that is finance only.

RTI gap pays the difference between the write-off payout and what you paid, however you paid it. So, no, that is not finance only.

ib3705

Utter rubbish, the gap insurance this clown refers too is the very basic and yes it would clear finance but the are many varieties of gap to choose from(return to invoice, replace to new at time of incident being the best cover and only a minimal amount more over the term.

force_ten

guzzbuzz wrote: »

Is it ONLY for cars that have been bought via finance though?

That's what im asking, sorry if that wasn't clear....

No you could take GAP insurance on a cash sale to mitigate your loss in the event of a total loss claim

https://www.moneysavingexpert.com/car-insurance/gap-insurance/

Have a read of that article from money saving website, I would not rule out GAP but would look outside the dealers to buy it you could get a gap policy for about a quarter of what the dealer is trying to sell you

danny91

No, it doesn't have to be purchased via finance. As others have said you will need the RTI GAP (Return To Invoice)

But please, whatever you do. Don't purchase it through motorpoint! ive just taken out a 5 year policy for £150!!

guzzbuzz

Big thanks to everyone for the replies. I think it's worth getting then and seems like a no brainer?

It's a relatively small cost and does cover me for a number of years.