Gap insurance - car purchase

blue_haddock

nadnad wrote:

somebody has to be a car salesman do they not?!

And guess what i do for a living? Yes thats right i sell cars for a living.

Surely as this website is designed to save people money it would be best to not only explain what a something is about but also guide people as to where they can get the same item from but a lot cheaper.

ChrisB_4

nadnad - I'm afraid the dealers are very quick to standardise the gap as part of the initial finance proposals in addition to the shocking refusal to tell me the APR (just the flat rate). They don't even ask if you want to pay for the gap insurance upfront, instead its put on top of the total finance! so you pay interest on that too. I'd have to be pretty switched on at the time during a stressful consumer situation to realise all these points. I take your point that if the price is right, gap insurance would appear sensible. Are there any small print conditions? - as per the type of thing we see in payment protection conditions.

bluey - we're onto to something there. Couple of hundred quid cheaper? What other companies offer gap insurance?

nadnad

Yes - I know when buying a car you can be blinded by what the salespeople tell you - they can make it all sound soooo easy - I should know I've heard my husband. I'm afraid this is just the way salespeople do business - but its good that sites like these help people to learn and understand whats going on. May I just say also (in support of my husband!!) he works a slightly different angle than a lot of his colleagues and he works on the basis that if he doesn't explain something fully and makes sure that the customer understands at the time then he knows he will have trouble down the line - either they pull out of the deal or cause problems at some point - if this happens its a waste of his time - he ensures he gets it right first time and makes sure the customer knows what they are getting and are happy with it - thats not to say he does have the usual salesman patter but he doesn't see the point in misleading people - I wish more salespeople were like that!

davido_4

My wife just bought a"new" car (£7500) after some serious haggling at a main dealer.

When we came to pay the dealer offered us VRI Vehicle replacement insurance or GAP insurance.. We were offered a policy for £339!
We said no because we hadn't any time to think & didn't like the way it was sold.

SO.. I have been researching on the web and for £150 I can get the same cover...

My question is simple... is VRI/Gap Insurance worth the £154 for 3 years cover on a £7,500 car (was on the forecourt at £8995!).

Sorry to ask a dim question but it does make sense esp. if you have a car that could be depreciating by 20% a year? Oh... and we bought the car after our old one was written off & the insurance co. paid full 2nd hand value(non fault accident)
thanks
D

stanmoresaver

Firstly, appologies if you already know this, there are two type of gap insurance.

1/ pays out to clear of the value of oustanding finance and

2/pays out to the invoice price, usually minus car tax and bits and bobs.

My Volvo S60 D5 was stolen following a burglary and the Gap policy put a Mercedes E320 CDi (2001 reg) on the drive finance free by covering the depreciation on the Volvo over the past 2.5 years. I even took a bottle of wine to the car salesman who "pursuaded" me to pay £300 for the cover.

Hindsight is a wonderful thing but I am really glad I purchased it.


:j

DTBK

stanmoresaver wrote:

Firstly, appologies if you already know this, there are two type of gap insurance.

Correction. There are three types of GAP Insurance:

1. Finance GAP
2. Invoice GAP (referred to by many motor dealers [incorrectly] as VRI)
3. Replacement GAP (A true VRI [Vehicle Replacement Insurance] Policy)

In the event of your vehicle being written off they pay out as follows:

Finance GAP
This policy covers you for the difference between your Motor Insurance payout and the amount outstanding on finance, if the Motor Insurance payout was not enough to settle the finance.

Invoice GAP
This policy covers you for the difference between your Motor Insurance payout and the original purchase price of the vehicle. It can be purchased whether you paid for your car by way of a Finance Agreement or a cash purchase.

Comparing the two policies above, there's no guarantee if you bought your car by way of a Finance Agreement that you're going to owe more than the Motor Insurance payout you receive in the event of your vehicle being written off (amount borrowed, interest rate, term, how soon or late in the finance agreement the car is written off - all play a part). However it's almost guaranteed that should your vehicle be written off your Motor Insurance Company will pay you less than your original purchase price of the vehicle. With brand new cars losing on average 30% of their value in the first year alone this difference can be substantial and will be more than almost any premium you can pay for GAP Insurance even if you have been daft enough to buy the policy from a Motor Dealer (I heard recently of BMW charging a massive £1100 for Invoice GAP on a £36k car).

Replacement GAP
This policy covers the difference between your Motor Insurance payout and the cost of replacing the car New for Old with a brand new same spec (or nearest equivalent) model. Even if the replacement vehicle is more expensive than you originally paid.

This policy is only available for vehicles brand new at first registration

davido wrote:

My question is simple... is VRI/Gap Insurance worth the £154 for 3 years cover on a £7,500 car (was on the forecourt at £8995!).

This requires a simple decision process:

Question: If the £7,500 car is written off at any time in the next three years will your motor insurance pay you less than £7,500 as a write-off value for the car?

Answer: Yes.

Question: Will the difference between the motor insurance payout and the original £7,500 be greater than £154?

Answer: Almost certainly yes.

Conclusion: It would be worthwhile, in my opinion, considering investing £154 in Invoice GAP Insurance. By the same token if the car is brand new and you are the first registered keeper it may be worthwhile considering purchasing Replacement GAP Insurance as this would cover you to the full replacement price - which you have highlighted in your post as currently being £8995.

For your info, www.surfandprotect.com's Invoice GAP policy (underwritten by Norwich Union) for a £7500 car is £145 (Replacement GAP = £202) for three years cover.

As a final note worth pointing out for anyone considering GAP Insurance, if the car being covered is brand new, many Motor Insurance Companies provide a New for Old replacement scheme within the first 12 months. For almost all GAP Insurance policies if the vehicle is changed during cover for any reason the remaining term of the GAP policy is forfeited.

However, the Replacement GAP Insurance policies sold on the website I mention above are different in so much that if the vehicle is replaced under the New for Old scheme of your Motor Insurance, the remaining term of the GAP policy will be transferred to your new car.

If you're buying a new car it's worth checking with your Motor Insurance to see about any New for Old scheme they may offer, and if you're being offered/pressured in to GAP insurance by your motor dealer ask him what happens to the GAP policy if your Insurance company replace the car New for Old during the cover period. Whatever answer he gives you I'd double check the terms of the GAP Policy first because 9 times out of 10 you'd lose the remaining term of your GAP Insurance policy.

That's enough from me coz it's late now.

Hope this info helps

Regards

DTBK

ronnie_2

iam so glad i had gap insurance, few years back my 1.5 year old car was written off (everyone was ok), gap paid the difference on insurance and because i had no finance outstanding i got a nice cheque for £18k - if i hadnt had gap then i would have had to settle for the insurance company payment of £13k.
Bought a new car and nice people at Honda gave me GAP free this time, what a difference it makes paying cash for a motor

bobb_a_job

hi there just a tad confused by all this insurance talk, i have GAP/ VRI insurance with Peugeot. if my car were a total loss, and obviously my personal insurance wont pay the full amount of the finance on my car would Peugeot pay the difference of the finance and thats it endof or would they just give me a new car and i would still be paying the remaining finance i originally had?

CHR15

Anyone work those posts out??

First a new joiner pulls up a post from nearly 4 years ago

Then another first poster but joined in 2008 been thanked twice in two posts...but only made one which hasn't been thanked in.

Miranda_D

Hi bobb_a_job,

Different companies work different ways, i have been doing a lot of research recently for Gap Insurance and im particularly interested in Vehicle Replacement Insurance as i will be taking delivery of a new car in the next few weeks.

Some companies will only replace the vehicle, leaving you to pay off the finance. Where as some other companies offer you the replacement vehicle insurance as well as finance insurance. One company that stood out for me was cargapinsurance.co.uk as they had upgrades you can add to your basic gap insurance. I done a quote for a Replacement vehicle upgrade plus finance shortfall Insurance and it cost just over £200. Which is much cheaper than ive been quoted in other places.

As lostinheaven said, check through your terms & conditions and if not, i hope its not too late to cancel!

good luck