GAP Insurance Explained

GAP Insurance Explained

Gap insurance is designed to cover the difference between the amount your insurer pays out if your car is stolen or written off, and the price you paid for it.

Take a look at the below information on GAP insurance, so you can see if it may be a suitable product for your circumstances.

With any type of financial product, it is important to do your research and understand the pros and cons before making a purchase.

What is GAP insurance

GAP stands for Guaranteed Asset Protection. The overall purpose of this type of cover is to assist you financially in the event of your car being stolen or written off.

GAP insurance is a type of cover you can buy to protect you when you buy a new car. It is designed to cover the difference between the amount your car insurer would pay out if your car was stolen, or written off, and the price you paid for your car.

So imagine if you’ve just spent £17,000 on a car, or have taken out finance to that sum. You drive the car home, and then a week later it’s stolen – or written off in an accident. Your car insurer hands you a cheque for £12,000. You paid the dealer £17,000 – but by the insurer’s estimates, £12,000 is what the car is actually worth, as cars depreciate notoriously quickly once it is driven off the forecourt. This leaves you £5,000 down – or even worse – potentially in debt by £5,000 (plus interest) to your car finance company for a car you no longer own.

Where your car is a total loss, ‘GAP’ insurance is intended to work alongside your standard car insurance – topping up the difference between what they will pay, and what you’ll actually need to get back on the road.

GAP Insurance can be taken out on new and used vehicles. Depending on how long you have owned the vehicle, you may be offered a policy that returns your finances to the vehicle’s current ‘value’ or to the value you purchased the car for.

Do I need GAP insurance?

GAP insurance can be useful and is therefore worth thinking about when purchasing a new car, especially if you are looking at using finance to purchase the car.

If you have used a large loan to buy your vehicle, GAP insurance can offer a means of paying off outstanding finance on your car, which means if your car’s stolen or written off you won’t have to continue to make payments on it and be left with a large outstanding amount.

If you are concerned about the depreciation of your vehicle, the quicker your car loses its value, the less your insurer will pay after a total loss incident, compared to what you paid for it. Certain cars will depreciate faster than others, so its worth finding out when looking to get a new car.

If you have a long-term rental agreement for a vehicle with a mileage allowance, a write-off could leave you without a car and a bill for thousands of pounds. Gap insurance can help protect against this situation and provide you with peace of mind.

It is worth considering the above scenarios and what the financial impact could be on you if you have a stolen or written off car.

Where can I get the best deal on GAP insurance?

If you purchase your car through the dealership, they will usually talk to you about GAP insurance and as you if you would like to take it out.

While Gap insurance may be a valuable product for you, the dealership might not be the best place to buy it as it may be more expensive than other suppliers on the market.  The dealership may also receive commission from the insurance provider for each policy they sell, so again they may be too keen to sell you something you may not need or are going to be paying more than you should be.

You can often find GAP insurance far more cheaply online – sold directly by insurers and brokers, or via the good old comparison sites.

Does Go Car Credit provide GAP insurance?

Go Car Credit does not provide GAP insurance. We do not cross-sell or up-sell any additional products but as a Go Car customer fully comprehensive car insurance is required as part of your agreement with us, but this will need to be purchased through an insurance provider. We do not provide this as part of your agreement with us.

We provide Hire Purchase Car Finance. Hire purchase car finance gives individuals the chance to buy a vehicle without having to pay for the amount in full before they can drive it. When you come to Go Car Credit for this type of finance, you’ll be hiring your car from us and your purchase will be secured against the motor itself. That means the car is legally owned by us, and you will be the registered keeper while you make fixed monthly payments across a set period of time. Once you have paid the car’s value in full, plus an amount of interest together with the £10 option to purchase fee, the car will be yours.