Buying a brand new car for many people is a big deal. Unfortunately, the reality is that as soon as you drive your beloved car away from the garage it automatically loses a considerable amount of its value. Accidents happen and the chances are it may not even have been your fault, so why take the risk?
How will GAP Insurance benefit me?
If your vehicle is stolen or damaged beyond repair, your insurance company may not pay you enough to settle the outstanding finance on the car, and will certainly not pay you back the amount you paid for it. Taking out GAP Insurance ensures you will not be left out of pocket if you have a total insurance loss on your vehicle.
I can get GAP Insurance from the car dealership so why should I purchase it online?
In theory the GAP Insurance you buy from a dealership is a good product. In practice, GAP Insurance purchased from your local dealership may not always be the best product or price that suits your needs. The most important message is to shop around and don’t accept the first deal just because it is convenient or because you are being pressured by the sales rep.
Remember, with most policies you have a 14 day cooling off period should you be unhappy with the deal.
Car dealerships typically sell GAP Insurance policies from £299 - £799. Consumers may think they are too expensive and not worth the price they are paying, especially if it is more expensive than their Comprehensive motor insurance policy they already have. If the premium was 1/3 of the cost dealers charge, would it be worth it? The answer... If you buy the right policy, at the right price!
Back To Invoice Policies
With Back To Invoice policies you have the option to clear the balance of the finance or return to the original invoice price of the vehicle. For example: a vehicle purchased today on finance for approx £30,000 with finance over 4 years and charges of £4500, would, if written off next month, cost you £34,500.
A Back To Invoice policy that nearly every dealership sells, would not clear the £4500 finance charges. This would only get you back to the invoice price. Purchasing a Finance GAP Insurance policy would clear the £4500 however, this wouldn’t get you back to your invoice price.
Vehicle Replacement Policies
Protect yourself with a Vehicle Replacement Policy that allows you to claim a higher monetary level than that of a Back To Invoice policy, however, it can be a more expensive policy to buy.
If you have recently bought a new vehicle and have benefitted from the Government’s Scrappage Scheme or a high level of discount from the dealer, there is no guarantee that these levels of discount will be available a year from now.
You can find a range of independent providers of GAP and VRI listed in the GAP insurance and Vehicle Replacement Insurance categories. You can also find a comprehensive comparison of some of the most popular providers and their policies at the ALA Gap Insurance website.
PLEASE NOTE: The guidance published in this article is for information only and does not constitute financial advice or a recommendation of any particular car insurance product or company. If you are in any doubt please consult an independent insurance adviser. A database of advisers in your area is available at www.unbiased.co.uk
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