Gap insurance types

Legacy_user

Hello all,

If I buy a used car on HP or using a personal loan do I need gap insurance and if so, what type. I’m happy with like for like ans don’t need a new vehicle to replace an older one if I make a claim for an accident, ect. So I don’t want to pay extra for a policy I didn’t need. I understanding it would help clear any outstanding finance (either personal loan of HP) so I’m unsure what to get, if any at all. Please can you help? Thanks.

AdrianC

Do you NEED it? No.
Might it be useful and welcome? Yes, perhaps.

What it does is fill the gap between your insurance payout and what you owe on the finance, if and when the car is written off.

Say you owe £12k, but the car's depreciated faster than you've been paying the debt off, so is only worth £10k. Insurance pay £10k of the finance off, you still owe £2k. Gap insurance covers that.

Any other situation - it does nothing.

Scrapit

Huw1234 wrote: »

Hello all,

If I buy a used car on HP or using a personal loan do I need gap insurance and if so, what type. I’m happy with like for like ans don’t need a new vehicle to replace an older one if I make a claim for an accident, ect. So I don’t want to pay extra for a policy I didn’t need. I understanding it would help clear any outstanding finance (either personal loan of HP) so I’m unsure what to get, if any at all. Please can you help? Thanks.

There is no need but for the price you'll probbably want it. Assess the risk and decide wether it's relevant. It probably will be.

neilmcl

How old is the car?

System

The car is 3 years old so it will have lost most of its value in depreciation (I tend to buy cars 2/3 years old as cars less than one year loose so much sometimes). My worry is that if something happens like an accident/written off, ect. (sometimes things happen that you can’t control), I won’t be able to cover the finance/loan and be left paying for a car I don’t have.

Scrapit

Huw1234 wrote: »

I won’t be able to cover the finance/loan and be left paying for a car I don’t have.

Sounds like you need it then. What prices have you got? There are some good deals out there.

AdrianC

Huw1234 wrote: »

The car is 3 years old so it will have lost most of its value in depreciation (I tend to buy cars 2/3 years old as cars less than one year loose so much sometimes). My worry is that if something happens like an accident/written off, ect. (sometimes things happen that you can’t control), I won’t be able to cover the finance/loan and be left paying for a car I don’t have.

Insurance will cover the value of the car.
Gap doesn't replace insurance.

It sits on top of it, where the insurance payout is less than the outstanding finance.

System

I was thinking I might need it for the first year as the loan amount I owe will be more than the car is worth but after a year I should have paid enough for the car to be worth more than the amount of loan outstanding. But it’s always nice to have more if that’s what the gap does (unless it won’t payout in that case).

Nearlyold

AdrianC wrote: »

Do you NEED it? No.
Might it be useful and welcome? Yes, perhaps.

What it does is fill the gap between your insurance payout and what you owe on the finance, if and when the car is written off.

Say you owe £12k, but the car's depreciated faster than you've been paying the debt off, so is only worth £10k. Insurance pay £10k of the finance off, you still owe £2k. Gap insurance covers that.

Any other situation - it does nothing.

Finance Gap is not the only type of GAP insurance available - you can also buy "Back to Invoice" GAP which covers the GAP between the insurance write off payout and the original price you paid for the vehicle.

Combined Gap covers the greater of the finance GAP or the invoice GAP (though the invoice GAP element usually runs for a shorter term than the finance GAP element can)

System

Thanks. There are so many types. For a used car then is it best to go for return to invoice or return to value (as I think vehicle replacement is best for new vehicles). What are the pros and cons of each?

Carrot007

I think it really depends on the cost of the vehicle. Obvoisly more expensive ones are going to be more sensible with it.


My experience is I bought a Corsa in 2004? (an 02 one?) and was getting a personal loan. They sugested it, I said no. Within six month is was written off (icey road). The insurance paid out more than I had paid for it! I went back and bought "it" again from the same place (well 5 door rather than 3 (wich I would have before if they had one!)). Had £500 left on top.


Or course it does not always end this way. You take your chance after weighing up the options.