GAP insurance . . .

RockinNRollin · May 3, 2023

Just musing; traditionally GAP insurance is supposed to deal with the shortfall between the market value of a nearly new vehicle and a new vehicle so the policy holder can in the event of a write-off, purchase a brand new vehicle. Now putting aside the fact that 6.1 Cali production is likely winding up soon (and that a replacement may change the value of used vehicles plus the new one is likely to be more expensive), where the value of a nearly new vehicle is actually on a par with the discounted price of a new order, does this mean the payout would reflect the true used market value and therefore imply GAP insurance isn't actually necessary in the current climate?

dspuk · May 3, 2023

Gap has been discussed many times. See below. It’s a waste of money, don’t buy it. Gap is not necessary on new cars in any climate and less so on a Cali.

Cue lots of people conned into buying Gap disagreeing….

Vagophile · May 3, 2023

dspuk said:
Gap is not necessary on new cars in any climate and less so on a Cali.

I read an insurance industry report that identified gap insurance as one of the least claimed products and most remunerative for the industry.

andyinluton · May 3, 2023

dspuk said:
Gap has been discussed many times. See below. It’s a waste of money, don’t buy it. Gap is not necessary on new cars in any climate and less so on a Cali.

Cue lots of people conned into buying Gap disagreeing….

Ok I'll disagree ....

GAP insurance may be useful depending on what you are trying to achieve.
You can get different levels & it depends what risk you are trying to cover.

As an extreme example, If you have taken 100% value 10 year HP finance on a new 4motion with all the options ticked, if your van worth say £90k gets stolen in the first week your finance settlement figure even with an early repayment rebate could be something like £125k - your normal van insurance will not cover that shortfall it would only pay out the £90k. In this case you would want GAP insurance with sufficient value to cover outstanding finance.

Most GAP insurance only covers back to invoice figure & pays out the difference between what you paid & your van insurance payout. If you bought your van cheap & there's been a price increase, that GAP insurance is worthless you could be 20% short of paying for a new van. In this case back to invoice GAP is worthless on a cali.

5 years ago if you were dealing with say a Fiat that lost 60% of its value in the first year back to invoice would have been worth having.

The most important thing is to try and get "new for old" cover for the first few years on your normal car insurance - that way if it is written off & even if you are in negative equity on the finance, you will get a new van & it will just become a substitute vehicle on your finance agreement.

Something else worth noting is that GAP insurance is related to time but you normally pay for it as lump sum payment upfront. Should you sell / replace your vehicle before the end of the GAP insurance period you are entitled to a pro rata refund of your premium.

dspuk · May 3, 2023

andyinluton said:
Ok I'll disagree ....

GAP insurance may be useful depending on what you are trying to achieve.
You can get different levels & it depends what risk you are trying to cover.

As an extreme example, If you have taken 100% value 10 year HP finance on a new 4motion with all the options ticked, if your van worth say £90k gets stolen in the first week your finance settlement figure even with an early repayment rebate could be something like £125k - your normal van insurance will not cover that shortfall it would only pay out the £90k. In this case you would want GAP insurance with sufficient value to cover outstanding finance.

Most GAP insurance only covers back to invoice figure & pays out the difference between what you paid & your van insurance payout. If you bought your van cheap & there's been a price increase, that GAP insurance is worthless you could be 20% short of paying for a new van. In this case back to invoice GAP is worthless on a cali.

5 years ago if you were dealing with say a Fiat that lost 60% of its value in the first year back to invoice would have been worth having.

The most important thing is to try and get "new for old" cover for the first few years on your normal car insurance - that way if it is written off & even if you are in negative equity on the finance, you will get a new van & it will just become a substitute vehicle on your finance agreement.

Something else worth noting is that GAP insurance is related to time but you normally pay for it as lump sum payment upfront. Should you sell / replace your vehicle before the end of the GAP insurance period you are entitled to a pro rata refund of your premium.

I should have added the caveat "if you get the right insurance". I always make sure that I get new for old insurance. IMHO Gap is the motor trades largest upsell con and one of the biggest since endowment mortgages - it should really be monitored better at the dealer end and not just be another revenue item without proper advice.