GAP Insurance - Do We Need it?

DoaM

We are buying SWMBO a new car ... Model can be advised if necessary but is probably irrelevant for the purposes of this question. Car purchase will be funded by £300 trade in (57 plate old car), a nominal sum on credit card (for S75 protection) and the balance by bank transfer ... no credit arrangement involved (other than the credit card).

My question is ... do we need GAP insurance? I can understand the benefits if you've financed a new vehicle, but when you're a cash buyer? (Never had it before so we're uninitiated regarding the pros and cons).

PS - We know not to take it out with the selling garage. IF we decide we need it then we'd go 3rd party. Any recommendations?

Scrapit

What would the gap be if you've paid cash?

EssexExile

It's entirely up to you. Check your car insurance first thought, ours replaces with a new vehicle if it's written off/stolen in the first year.

neilmcl

As above, not wholly necessary for a cash purchase but if you want peace of mind that your car will be replaced over a period of 3 to 5 years if written off or stolen for as little as £150 then you may think it worth the gamble.

Tokk

Basically... No, you don't need it, but if you get into a situation where you wind up wanting it you'll kick yourself if you don't have it.

I guess it comes down to how well you trust your luck?

DoaM

Scrapit wrote: »

What would the gap be if you've paid cash?

That was sort of the point of the question. Would GAP insurance even be relevant for a cash purchase? How does it work for cash purchases? I know for finance it covers the shortfall between the financed value and whatever the insurance pays out in the case of a total loss, but with a cash purchase there is no financed value.

DrEskimo

DoaM wrote: »

That was sort of the point of the question. Would GAP insurance even be relevant for a cash purchase? How does it work for cash purchases? I know for finance it covers the shortfall between the financed value and whatever the insurance pays out in the case of a total loss, but with a cash purchase there is no financed value.

Return to finance is just one type of GAP. There is also return to invoice and vehicle replacement gap.

Return to invoice/vehicle replacement basically cover depreciation. If you buy a car for £10k, and then 2 yrs later write it off, your insurance company will pay you 'market value' for the car at the time it is written off. Let's say this is £6k. If you had return to invoice GAP, they will pay out £4k to get you back up to £10k, the original invoice price.

Replacement vehicle can be good if you think the cost of the car will increase over the term of the cover, or if you think you got a particularly good price for your car. In 2yrs time, £10k might not allow you to buy the same spec car again, it may now require £12k. Replacement vehicle will therefore pay out £6k.

I bought a used EV with cash, and I got a 5yr GAP policy which is return to invoice/vehicle replacement all under one policy. IT will pay out whichever is highest. Main reason is that a new battery model is going to be released, so prices are going to rise, and used prices for EVs are going up already anyway! I can't find my car for the price I paid.

Secondly, insurance companies very rarely pay out a far market value, they typically give you the lowest trade price, which means you can't feasibly buy the same spec car to put you in the same position. It takes loads of back and forth and arguing to get anywhere near a fair payout. GAP negates any need for this, and has the added bonus of covering depreciation.

For £50 per year, it's relatively cheap for piece of mind. Whilst the risk of total write off is low (maybe not that low for an EV is say the battery gets damaged...!), for me, the potential financial gain given the cost is worth it.

HTH :beer:

EDIT: Oh i used TotalLossGap. Was the cheapest policy, most comprehensive (return to invoice and vehicle replacement), had the most generous terms (no mileage or monetary limits) and could cover a used car for 5yrs.

DoaM

Thanks for that. Just the sort of feedback I was hoping for.

PS - TLG quote £199.82 for 5 years cover for the vehicle in question (£9k purchase price if you include the part-ex).

DrEskimo

Yea you want to include the actual cost of the car, so include P/X or any finance deposit contributions.

Half it was useful

Do your research on other companies (ALA, gapinsurance, gapinsurance123...), but they were the best when I looked about.

motorguy

neilmcl wrote: »

As above, not wholly necessary for a cash purchase but if you want peace of mind that your car will be replaced over a period of 3 to 5 years if written off or stolen for as little as £150 then you may think it worth the gamble.

+1

If you were to write the car off it would be nice to get the invoice price of the car back towards a replacement, rather than the value at the time.

lopsyfa

DoaM wrote: »

Thanks for that. Just the sort of feedback I was hoping for.

PS - TLG quote £199.82 for 5 years cover for the vehicle in question (£9k purchase price if you include the part-ex).

You can do better than that price. I purchased GAP, from https://www.ala.co.uk/, with maximum benefit of £15000 for £160 in August-2018 and ALA also price match.

Also, for £9k purchase price, I don't think the GAP should cover more than £7k except you expect the car to be worth less than £2k after 3-5 years the GAP will be covering.