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  • FIRST POST
    • Addd
    • By Addd 15th Apr 18, 2:38 PM
    • 15Posts
    • 1Thanks
    Addd
    GAP Insurance
    • #1
    • 15th Apr 18, 2:38 PM
    GAP Insurance 15th Apr 18 at 2:38 PM
    Hello everyone. I'm currently leasing a car and I was wondering if I need GAP insurance? Id never heard of it until recently.
    Does it cost as much as your normal car insurance as well?


    Thanks. How good is this site by the way. Saved me loads of money .
Page 1
    • flashg67
    • By flashg67 15th Apr 18, 5:00 PM
    • 2,466 Posts
    • 1,612 Thanks
    flashg67
    • #2
    • 15th Apr 18, 5:00 PM
    • #2
    • 15th Apr 18, 5:00 PM
    You don't have to have it but I suppose it's like any insurance - only any good if you need to claim.

    Do some research to understand the different types, and avoid overpaying at a dealer - much cheaper to buy direct from the GAP provider.

    I bought it for my last new car and never needed it, but I know someone who had a 3yr old car written off, and used it to get the full purchase price back.(return to invoice GAP). Seem to recall I pad about £140 for 3 years cover.

    The most common type covers you for any shortfall in the insurance valuation and what you owe the finance company in the event of a total loss claim, which could be next to nothing, or several £000 depending on the car
    • lostinheaven
    • By lostinheaven 16th Apr 18, 1:38 PM
    • 170 Posts
    • 87 Thanks
    lostinheaven
    • #3
    • 16th Apr 18, 1:38 PM
    • #3
    • 16th Apr 18, 1:38 PM
    Hello everyone. I'm currently leasing a car and I was wondering if I need GAP insurance? Id never heard of it until recently.
    Does it cost as much as your normal car insurance as well?


    Thanks. How good is this site by the way. Saved me loads of money .
    Originally posted by Addd

    By "leasing a car" - do you mean that it's a Contract Hire Agreement with no option to purchase the vehicle (e.g. you have to hand it back at the end of the agreement term), or do you mean that it's a PCP (or other form of finance) agreement where you have a contractual option to purchase the vehicle (e.g. once you've made all of the repayments, the car becomes your property)?
    • Addd
    • By Addd 29th Apr 18, 10:25 AM
    • 15 Posts
    • 1 Thanks
    Addd
    • #4
    • 29th Apr 18, 10:25 AM
    • #4
    • 29th Apr 18, 10:25 AM
    By "leasing a car" - do you mean that it's a Contract Hire Agreement with no option to purchase the vehicle (e.g. you have to hand it back at the end of the agreement term), or do you mean that it's a PCP (or other form of finance) agreement where you have a contractual option to purchase the vehicle (e.g. once you've made all of the repayments, the car becomes your property)?
    Originally posted by lostinheaven




    The first one. I just make monthly payments and give the car back at the end of the term. Does this make a difference?
    • Nearlyold
    • By Nearlyold 29th Apr 18, 8:48 PM
    • 1,059 Posts
    • 888 Thanks
    Nearlyold
    • #5
    • 29th Apr 18, 8:48 PM
    • #5
    • 29th Apr 18, 8:48 PM
    It makes a difference in the type of Gap policy you need (assuming you want to buy GAP at all). A typical Contract Hire GAP will cover the balance of the remaining Contract Hire payments you may have to make if the car is written off.
    Last edited by Nearlyold; 29-04-2018 at 8:50 PM.
    • lostinheaven
    • By lostinheaven 30th Apr 18, 11:49 AM
    • 170 Posts
    • 87 Thanks
    lostinheaven
    • #6
    • 30th Apr 18, 11:49 AM
    • #6
    • 30th Apr 18, 11:49 AM
    The first one. I just make monthly payments and give the car back at the end of the term. Does this make a difference?
    Originally posted by Addd
    Yes. It makes a difference. Possibly such that you may not need GAP insurance at all.

    First of all, you need to be looking at Contract Hire GAP insurance rather than Invoice or Replacement GAP insurance (you can only have the latter two if you're buying the vehicle).


    However, not all Contract Hire agreements need GAP insurance. It'll depend on the terms of the Contract Hire agreement in relation to your liability to the finance company in the event that the vehicle is written off.

    As a general rule, if a lease vehicle is written off, the following happens:
    • Your motor insurer calculates what they think the car is worth (this will be the amount that they pay to the finance company)
    • In calculating the "Early Termination Fee", the finance company will calculate what they think your car is worth. Then they'll add/subtract from that, some/all of the following:
      • The sum of all of the monthly rentals that you've not yet paid.
      • An administration fee for wrapping the agreement up early.
      • A discount for settling early.
    If the motor insurer's payout isn't sufficient to clear the entire balance of the Early Termination Fee, there'll clearly be a shortfall. However, how each finance company treats this shortfall varies from one to another, as follows:
    1. Some will hold you liable for ALL of the shortfall (advisable to have GAP insurance)
    2. Some will hold you liable for SOME of the shortfall (I've seen this be either a %'age of the total shortfall figure or, a nominal £cash amount per monthly repayment not yet paid - debatable whether GAP insurance is required at all or not)
    3. Some will hold you liable for NONE of the shortfall (I experienced this myself when I wrote a car off in December 2014. £3,800 shortfall but wasn't liable for any of it... clearly with this type of agreement GAP Insurance wouldn't normally be required)
    Overriding the above though is the small matter of your upfront/initial rental. E.g. in the event that a leased vehicle is written off, standard Contract Hire GAP insurance is designed such that the best case scenario is that you get to walk away from the agreement debt free but, you'll also have no car and, you'll need to find another lump sum to put down against a new lease on a new vehicle.

    That's where "Initial Payment/Rental Cover" comes in. You add it to the GAP insurance policy for a small additional premium and it ensures that if your car is written off, in addition to clearing the amount due to the finance company, you're also reimbursed a sum equal to the amount of the initial rental that you paid (normally up to a maximum of £3,000), which you can then use to start again.

    In short, depending on the sums involved and the wording of your contract, you may not need Contract Hire GAP insurance (or at least only require minimal cover) but, it may well still be prudent to have in relation to not having to put a dent in to your savings for another upfront lump sum (initial rental) on a new vehicle.

    HTH
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