Gap insurance

rubble2
rubble2 Posts: 546
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I appreciate there are a few existing threads discussing this subject and I can fully understand the advantage of taking out Gap insurance if buying a new car on finance but I wondered what the consensus is on my circumstances please?

I am buying an ex demo car (six months old) I am paying cash. As the car is already suffering ( benefitting) from initial depreciation and there will be no finance charges to account for if the vehicle is written off, is Gap insurance suitable for me or should I spend the money on something more useful/fun?
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  • AdrianC
    AdrianC Posts: 42,189
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    Gap insurance is - as the name suggests - designed to fill the gap between an insurance payout and what's still owed on finance. That's not an issue for you.

    You might still want to think about return-to-invoice gap, though...
    Yes, it's already had a chunk of depreciation - but it's got a lot more ahead of it.
    Also - because it's not brand new, you won't get the option of new-for-old replacement from insurance within the first year.
  • DrEskimo
    DrEskimo Posts: 2,337
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    There is also the fact that typically insurances market valuation for what they pay out is lower than what you need to buy a like for like replacement from a dealer or garage.

    The fact GAP will cover not only that shortfall (which can be as much as £1-2k), but then also cover the additional thousands extra in depreciation from when you originally bought it, makes it a fairly valuable insurance product for not a lot of money.

    Yes, a write off is probably unlikely and the extra £50/year could have been used elsewhere (I got a 5yr vehicle replacement policy for £250), but it's a small additional premium to my standard policy that for me could be worth thousands. 
  • Gosh, I wrongly assumed GAP insurance was for brand new cars only.  Never taken it out, never really looked into it. But reading this thread will mean that we will look into next time. Thanks OP and others.
  • boobyd
    boobyd Posts: 263
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    AdrianC said:
    Gap insurance is - as the name suggests - designed to fill the gap between an insurance payout and what's still owed on finance. That's not an issue for you.

    You might still want to think about return-to-invoice gap, though...
    Yes, it's already had a chunk of depreciation - but it's got a lot more ahead of it.
    Also - because it's not brand new, you won't get the option of new-for-old replacement from insurance within the first year.
    Adrian,exactly what I did,car was 6 mile pre reg at 6 month old.
    Took out 3 year RTI for £115.00,figured even as it had its first hit of depreciation the amount of gap was just so little it was a no brained.
  • boobyd
    boobyd Posts: 263
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    * brainer..

  • Grumpy_chap
    Grumpy_chap Posts: 14,740
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    Return-to-invoice GAP is a product that I fail to understand.  It is insuring against the certainty of depreciation.  I always understood that only risks can be insured.
  • DrEskimo
    DrEskimo Posts: 2,337
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    Return-to-invoice GAP is a product that I fail to understand.  It is insuring against the certainty of depreciation.  I always understood that only risks can be insured.
    It's not a certainty that you will experience a total loss during the term though?
  • Grumpy_chap
    Grumpy_chap Posts: 14,740
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    DrEskimo said:
    Return-to-invoice GAP is a product that I fail to understand.  It is insuring against the certainty of depreciation.  I always understood that only risks can be insured.
    It's not a certainty that you will experience a total loss during the term though?
    That risk is covered by regular motor insurance.

    If I buy a car for, say £10k, then three years later suffer a total loss claim and get paid out £4k, I have been reimbursed for the loss suffered as, by then, the car was only worth £4k.

    By GAP insurance paying me back the difference to £10k, I am in a better position post-total loss claim than I was previously.
  • jimjames
    jimjames Posts: 17,532
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    Personally I can't see the point of Gap insurance in this situation. If I buy a car I accept that it will depreciate and if I need to replace it I will have to pay more money. Insurance for this is over emphasising the risk of total loss of your car, the risk is pretty low and as with all insurance the company selling are the ones that make a profit. Yes if it happens to you it will be unfortunate but out of all policies very few will need to claim. 
    Remember the saying: if it looks too good to be true it almost certainly is.
  • DrEskimo
    DrEskimo Posts: 2,337
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    edited 19 April 2021 at 9:07PM
    jimjames said:
    Personally I can't see the point of Gap insurance in this situation. If I buy a car I accept that it will depreciate and if I need to replace it I will have to pay more money. Insurance for this is over emphasising the risk of total loss of your car, the risk is pretty low and as with all insurance the company selling are the ones that make a profit. Yes if it happens to you it will be unfortunate but out of all policies very few will need to claim. 
    Hard to argue with you....

    Generally I would agree but given the price and potential value I just thought sod it...I've wasted £50/year on a lot worse....

    Besides, as I have an EV I sort of feel that:

    A) the chance of it being written off in a accident is much greater (maybe completely wrong on this though!)

    B ) the prices of new models with larger batteries are very steep. To get a 2yr old version of the new 50kWh Zoe would cost around £20k, rather than the £15k I paid for mine...

    But you're probably right. Chances of me needing it are pretty slim....
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