My wife will collect her new Rapid Spaceback next Tuesday, she has purchased this using the Skoda 0% deal over 42 months. I know many think GAP is not worth it as the risk is small. Agreed it is a small risk but one that happened to some friends of ours who's Corsa decided to self ignite a couple of weeks ago and they only just got out in time before the car was an inferno. The Corsa was on finance and they would have been left with a financial loss without GAP.

 

I have looked through various on line sites and for peace of mind either VRI or RTI seems favourite. However my questions are what level of financial 'cover' should I enter? The car RRP £18.301. deposit paid (Car PX) £5.250 balance on finance £13.051 spread over 42 months with final payment of £6.187.

 

Based on above figures what price to put on the cover?

Also most seem to offer years cover 2/3/4 years, I assume we need 4 years as 42 months is 3.5 years?

 

Thanks for you input.

Edited 25 October, 201411 yr by ajw1100

Surely you want to put the value as the RRP of a replacement, not the amount you have on finance, otherwise you've just waved bye bye to the value of your deposit

Thats what I first thought, but if the car was written off the insurance would pay out 'Market Value' at the time of loss, If they paid out 2/3rd of the cars value then the GAP if insured at £18.301 would only pay out the difference of 1/3 plus I assume the difference in RRP between Invoice and Replacement? no way would they pay out the full £18.301

 

To insure GAP as full RRP would mean the car insurance need not pay out at all?

 

"There's something I'm missing but I just can't see it......"

Unless I'm missing something one of the reasons I assumed it was called GAP insurance was that it filled the 'gap' between market value and cost to replace

Have I got that wrapped round my @rse?

It wouldn't be possible to insure a set amount at the outset, as the market value will change from day to day

Gap only covers the difference between insurance payout and your finance settlement figure.

So on a 3 year PCP with only a couple of months to go GAP insurance would be pointless, as the market value would probably exceed the settlement figure

Exactly.

Exactly.

Anyone else of the same view?

I'm struggling to believe that can be right

I've had gap on every car I've owned on finance. This is how it works..its better on a used car because you might find your car is worthless at 9/10 years old but you might have 2ks worth of finance still owing. That's the reason its called GAP, it covers the gap between insurance payout and outstanding finance balance.

http://www.car2cover.co.uk/your-gap-insurance-options?gclid=Cj0KEQjwlK2iBRDk0Jnjso6AgM0BEiQAdX-iY6zN1tPvWYz_qYvWa0FCpeDhYfPk60ss57PQtHUJblYaAseZ8P8HAQ

I've only ever had the finance gap type policy..there are others like return to invoice etc.

Edited 25 October, 201411 yr by chris_1d

I've only ever had the finance gap type policy..there are others like return to invoice etc.

That's my point

You would obviously go for the one which suits your situation

Yeah, sorry my bad. Didn't realise there was more than one policy. Only ever been offered finance GAP.

Hi Chris.

Thanks for the link above, the company explains things a little more clearly, I also found the following on their website:

 

Copied from Car2Cover website:

 

[A customer told us he was buying a new prestige car on a 4 year PCP (Personal Contract Plan) finance agreement. The ‘on the road’ price of his new car was £36,500.00 (after a special discount of £5,000) and at the end of the finance plan the finance company required a payment of £13,870.00 if he wanted to keep the car. This is the finance company’s forecast of the vehicles approximate value at the end of the 4 year period.

We did this simple calculation to calculate how much Gap Insurance cover the customer needed to consider;

Vehicle purchase price £36,500.00 minus the lenders forecast value at end of the finance agreement of £13,870.00 = potential depreciation of £22,630.00. Not a difficult calculation – just common sense.

This customers dealership advised that he should purchase a 3 year £15,000.00 level of cover ‘Return To Invoice’ Gap Insurance for £599.00.

The ONLY thing this dealership did right was to suggest Gap Insurance in the first place. What they did wrong was;

> They offered a 3 year period of cover when the customer intended to keep the car 4 years, leaving him unprotected in the 4th year,
> They offered a £15,000.00 maximum claim limit when the lender is forecasting £22,630.00 in depreciation,
> They offered a Return To Invoice Gap Insurance when the likelihood is the cost of a replacement in year 2, 3 and 4 will be substantially more than £36,500.00 due to price increases, model changes, reduced discounts etc.
> They tried to make a substantial profit out of this customer – possibly up to £450 profit!

Not only would the customer have been inadequately covered by an inappropriate policy for a year less than he needed it – he would have been spectacularly overcharged.

After talking through his requirements with us the customer purchased a ‘Vehicle Replacement‘ Gap Insurance from us for a 4 year period with no claim limit for just £299.00 – a 50% saving for a policy that will pay for a replacement even if the cost of a replacement is more than he originally paid (not limiting itself to the original invoice price like the dealers policy) and for a year longer.]

 

The above is why I want to make sure that the GAP cover we buy is right for us.

 

It may be better for me to phone some of the companies on Monday to check what they offer and the costs and also to make sure they are 5 star Defaqto rated.

http://www.click4gap.co.uk/

Thanks but click4gap only gets a 1 - 2 star Defaqto rating.

Edited 25 October, 201411 yr by ajw1100

This is something I am looking at currently. I'm not only undecided on what type of GAP but who to go with.

My understanding is that you enter the amount you paid for the car. i.e after discount, but before P/X. Surely you can’t base it post P/X, otherwise you have basically given the garage your old car for free if your new one is written off.

When I bought the MK2 Superb, I also purchased GAP insurance that was "back to invoice". The car was purchased outright with no finance at all, and the GAP cover was such that if the car was a total loss they would pay the difference between the insurance payout and what I paid for the car in full,. The cover was for three years, and would have covered back to invoice even if the car was 2 years older. The value entered was the total value of the invoice, so for the OP that would be the full RRP.

 

Gap only insures the difference between the insurance payout and the outstanding finance or invoice value depending on the policy purchased. The policy ensures that you are not out of pocket in the even the car is a total loss.

Hi Hohn.

Thanks for your input, I agree that to disregard the value of the PX would not be a good idea. The advise above from mannyo is straightforward and is what we will most probably do.

 

So, in a nutshell you GAP insure for the full paid price of £X whether purchased on finance or cash ignoring your normal insurance cover. And should things go belly up during your period of cover and you lose the car then your Insurer will pay you back £A (Probably Market Value) and GAP ( Back to Invoice) will pay you back £B. A+B = £X. or back to your invoice price.

Should the car now cost more due to price increases then the GAP (under a Replacement policy) will add the price increase as £C so its A+B+C =£X of NEW version....

 

 

 

 

 

 

 

 

 

 

I've just had a quote from ALA at £120 for 3 years, on a back to invoice policy. I'll go for this i think. They get good reviews and it's reasonably priced.

If your own insurance replaces the car if written off, or damaged by more than 50% of new price, in the first year you can delay the start of your GAP policy by one year, this means you will be covered for longer than the 42 months you need, but only pay for 36 months. I used Frank Pickles which offered this feature, might be worth you getting an on line quote. ( Other than being a customer I have no connection with them! )

Sounds like you need cover that pays the greater amount of either the Invoice Price or the Finance Early Settlement Figure. The RRP might be £18k but with the finance fees you immediately owe say £21k.

 

Ours covers this if you decide that's the way to go (and you're using a forum supporter )

 

For an online quote - https://www.chrisknott.co.uk/GAP

 

best,

Nick

Hi Nick.

 

Thanks for the offer! We are using the Skoda 0% deal, why use my money when theirs is available which is why we have gone for the max 42 months. So would not want an early settlement policy....

 

Just deciding on Invoice or Replacement options.......

 

I will probably go the same route for my new Octavia.

This isn't what you're after then as ours is 36 months only but it would cover your invoice price scenario. All the best - enjoy the car!

Hello all.

My name is David and I represent one of the online providers of GAP insurance. I'm telling you this only in the interests of openness and to demonstrate that I have some detailed knowledge of this field - I will refrain from promoting our own policies specifically and give only general advice.

 

I was alerted to this conversation thread this morning and it's clear that there is some confusion about GAP insurance so I thought I'd jump in and try to bring some clarity to the discussion.  That said, this by ajw1100 is a good explanation:

 

So, in a nutshell you GAP insure for the full paid price of £X whether purchased on finance or cash ignoring your normal insurance cover. And should things go belly up during your period of cover and you lose the car then your Insurer will pay you back £A (Probably Market Value) and GAP ( Back to Invoice) will pay you back £B. A+B = £X. or back to your invoice price.

 

Should the car now cost more due to price increases then the GAP (under a Replacement policy) will add the price increase as £C so its A+B+C =£X of NEW version....

 

 

Generally, there are three different types of GAP Insurance:

 

Finance GAP insurance:

 

In the event of write-off, Finance GAP insurance aims to pay the difference between your Motor Insurance payout and the amount outstanding on finance at the time of claim.  Its ultimate goal therefore is to see you end up at a £0 (zero) position - granted, no vehicle, but no finance hanging around your "neck" either.

 

The problem with traditional Finance GAP insurance however is that there will always come a time sooner or later when the residual/market value of the vehicle in it's own right (the amount that would be paid out by your Motor Insurer in declaring the vehicle a Total Loss) will be sufficient enough to clear the remaining balance of the finance agreement.  In which case, Finance GAP insurance would pay out nothing whatsoever.

 

Invoice GAP insurance:

 

In the event of write-off, Invoice GAP insurance aims to pay the difference between your Motor Insurance payout and the original Invoice price that you bought the vehicle for.  If there's finance outstanding at the time of claim, in theory you should be able to use the combination of your Motor Insurance and GAP insurance payouts to clear what's left of the finance and have money left over to put towards the cost of your next vehicle.  If there's no finance outstanding (because you've either since cleared it or the vehicle was funded with cash first time around) you get to use the combination of both policy payouts towards the cost of your next vehicle.

 

Problems arise with this type of GAP insurance though, if the vehicle is financed with little or no deposit, moreso if there's a high interest rate involved too because for a period of time at the beginning of such a finance agreement, the calculation of an early settlement figure would equate to a figure greater than the original invoice price.  In which case an early claim on a "classic" Invoice GAP insurance policy could still leave you short.

 

Consequently most (certainly online) providers now provide a "Combined Invoice & Finance GAP insurance policy":

 

Combined Invoice GAP insurance:

 

In the event of write-off, this type of GAP insurance pays the difference between your Motor Insurance payout and the greater of either:

• The original invoice price you bought the vehicle for, or
• The amount outstanding on finance at the time of claim.

 

Finally, there's Replacement GAP Insurance:

 

In the event of write-off, assuming your vehicle was purchased brand new, Replacement GAP Insurance will cover the difference between your Motor Insurance payout and the cost of replacing the vehicle at the time of claim with a brand new version of the same (or nearest equivalent) vehicle - even if that replacement vehicle costs more than you bought the vehicle for first time around.

 

Some providers will also offer Replacement GAP insurance on a "combined" (with Finance GAP) basis, but in the vast majority of cases, the Finance GAP element will never be utilised.  Once again, just like with Invoice GAP Insurance, if there's finance outstanding at the time of claim, you'd clear the finance and use the remaining funds to put towards the cost of your next vehicle and if there is no finance outstanding at the time of claim, in theory you should be able to purchase a brand new version of the same (or nearest equivalent) vehicle again - although on this point, note that there have been GAP Insurance providers who's policies oblige you to let them organise your next vehicle or they'll reduce their payout.  The majority of GAP insurance providers (again certainly of those online) pay out in cash, leaving you free to choose what vehicle and from whom you buy next.

 

 

Some providers will allow you to buy what they refer to as "Replacement GAP insurance" for used vehicles too.  It works on the basis that if say, you buy an 18mth old vehicle with 26,000 miles on the clock, you buy their GAP insurance policy and if the vehicle is written off they'll pay the difference between your Motor Insurance payout and what it would cost at the time of claim to buy an 18mth old version of the same vehicle with 26,000 miles on the clock.

 

I've always disputed whether this is likely to offer any additional cover to that of an Invoice GAP insurance policy though, particularly as some providers will allow you to buy this type of cover for vehicles up to 10 yrs old.  My issue with it is that you wouldn't know what value is being applied to the Replacement vehicle until you were making a claim on the policy and particularly with the original vehicle having been a used vehicle, it's particularly feasible that the replacement value of the equivalent vehicle at the time of claim could be less than you bought the vehicle for originally, in which case you would have been better off with an Invoice GAP insurance policy but at the point of claim, you wouldn't be able to do anything about it.

 

At least with an Invoice GAP insurance policy on a used vehicle, from the outset, you know exactly at all times, what vehicle value the policy is aiming to get you back to.

 

If your own insurance replaces the car if written off, or damaged by more than 50% of new price, in the first year you can delay the start of your GAP policy by one year, this means you will be covered for longer than the 42 months you need, but only pay for 36 months. I used Frank Pickles which offered this feature, might be worth you getting an on line quote. ( Other than being a customer I have no connection with them! )

 

This is commonly referred to as "New For Old Cover" and if you have it as part of your Motor Insurance policy, you can indeed elect (with some GAP insurance providers) to defer the start of your GAP insurance policy by up to 12 months from when your vehicle was first registered, thereby avoiding having duplicate cover in the first year.  It's worthwhile taking the effort to really understand the cover provided by your Motor Insurance policy before you commit to this though.

 

Keitht, just for reference, you refer to the cost of a repair being more than 50% of the current list price, but it does vary considerably from one provider to another.  For example some will have their threshold specified as 60% of the Market Value of the vehicle that suffered the damage, which would of course be "easier" to result in a Total Loss claim, than 50% of the current (and potentially much higher) list price of the new equivalent vehicle at the time of claim.  In addition, I've seen such threshold percentages range from 50% to 70%.  You'd need to weigh this up against the prospect of them not being able to get hold of a physical vehicle at the time claim and if this happened, what the Motor Insurer's fall-back position would be.  E.g. where a physical vehicle cannot be replaced, some Motor Insurer's will revert to a cash payout equivalent to the manufacturer's list price of the new equivalent vehicle (like having Replacement GAP insurance in the first year).  Some will revert to a cash payout equal to the original invoice price you bought the car for (like having Invoice GAP insurance int he first year), whilst others still, will revert to a "standard" Market Value payout - in which case, you might prefer to have GAP insurance running in the first year.

 

 

 

I trust this all helps, I apologise for the length of the post and I hope I've not upset anyone or broken any rules, by jumping in here.

I'm happy to answer any general questions on GAP insurance if anyone would like further advice.

 

In the meantime, where do I find forum sponsorship details?

Regards

David

Hi David.

 

Thank you for jumping in, long explanations are far more helpful than one line statements or links that have no guidence when you get there!

My wife and I have never, in over 80 years of combined driving ever had a car written off so the chances of this happening are slim (Lets hope I do not speak too soon!). However we are both pensioners so incomes are reduced and this GAP insurance is more of a 'Peace of Mind' cover.

 

In our case there are no high interest charges as we are using 0% over 42 months so we are just needing cover for the £18,301.50 invoice cost but would like to compare against the Replacement option cost to see if that may offer better 'value'.

 

As CKI said above:

 

This isn't what you're after then as ours is 36 months only...

 

So if it was written off in month 37 then that would be our tough luck, I note some offer 48 months so I assume (hope?) that if the car was written off in any month between 37 and 42 I would receive a payout and that would also occur during months 43 to 48? If so then I guess you could continue GAP for the time you keep the car? New £18k, after 10 years value say £2k gets written off get £1.5k from insurer and balance £16.5 from GAP? Surely not that simple :wonder: .

 

What I thought would be a simple 'Tick a Box' policy has certainly changed.

 

If you wish to PM me with any details then please do so. Being a new forum member myself I am not sure of the rules but I get lots of slapped wrists from the 'Boss' so that would be nothing new!!

 

Alan.

...long explanations are far more helpful than one line statements or links that have no guidence when you get there!

 

Indeed they are, although I'm regularly told off for writing exceptionally long emails and forum posts!

 

... we are just needing cover for the £18,301.50 invoice cost but would like to compare against the Replacement option cost to see if that may offer better 'value'.

 

It really comes down to one thing... what do you want from your GAP insurance policy?

 

1. For it to aim to get you back to the original price you paid for the vehicle?
2. For it to cover the cost of replacing the vehicle with a new version of the same even if the replacement vehicle at the time of claim is more expensive?

Now, when considering this, keep in mind two things...

1. The better GAP insurance policies pay out in cash (subject to finance agreement settlement first).  This means that with the funds paid out (by both insurers), you'd be able to buy (or put money towards the cost of buying) any vehicle from any dealership of your choice. Therefore sticking with Invoice GAP insurance isn't necessarily a bad thing, it just means that you may need to do some negotiation over the purchase price assuming prices had increased by the time of claim - particularly if you got discount off the manufacturer's list price first time around. Which leads on to the second point...
2. Did you get discount off the manufacturer's list price (for any reason) and what are the chances that you'll be able to command the same or similar deal again in the future?  Replacement GAP insurance for a brand new vehicle would be aiming at getting you up to the manufacturer's list price for a brand new version of the same (or nearest equivalent) vehicle at the time of claim.  Consequently, although the List Price will usually increase over a period of time, Replacement GAP insurance really comes in to its own where there was discount obtained off the list price first time around. It would simply mean that compared to an Invoice GAP insurance policy, you'd theoretically be in receipt of a larger payout and therefore have more money left over to put towards the cost of your next vehicle.

That said, often the difference in price between Invoice and Replacement GAP insurance is negligible.  For example, I just ran a quote based on your vehicle value and for a 3yr policy our Replacement GAP insurance is circa £35 more expensive than Invoice, whereas for a 4yr policy, Replacement GAP insurance is just circa £8 more expensive than Invoice GAP insurance.

 

So if it was written off in month 37 then that would be our tough luck, I note some offer 48 months so I assume (hope?) that if the car was written off in any month between 37 and 42 I would receive a payout and that would also occur during months 43 to 48? If so then I guess you could continue GAP for the time you keep the car? New £18k, after 10 years value say £2k gets written off get £1.5k from insurer and balance £16.5 from GAP? Surely not that simple :wonder: .

 

Okay... so in principle it is that simple, but there's a few things to note.

 

You are correct, that if you buy a 36 month GAP insurance policy and the vehicle is written off in month 37, that would just be incredibly bad luck!  However, some GAP insurance policies can be renewed at the point of expiry so, assuming you'd paid to renew the policy, you'd be alright! :-)  Of course if you bought a 4-year policy upfront you'd already be fine if the vehicle was written off (accident / fire / theft / flood etc) at any time in months 37 through 48.

 

Example 1 - Invoice GAP insurance

• Your car is written off in month 37 (for the sake of example, before you make the 37th monthly repayment) 
• You have circa £7665 outstanding on finance (I've assumed your monthly repayments are circa £295)
• The policy pays the difference between your Motor Insurance payout and the £18,301.50 purchase price. 
• You use the £18,301.50 to clear the £7665 outstanding on finance and have £10,636.50 remaining to put towards the cost of your next car.

Alternative "No-Finance" example - if you'd have got to the end of the 42-month PCP agreement, paid the £6,187 final figure, kept the vehicle and then your car was written off in say month 47.  The GAP insurance policy still works the same way, but you'd have no finance left to clear so all things being well you'd have the whole £18,301.50 to put towards the cost of the next car.

 

Example 2 - Replacement GAP insurance

 

• Your car is written off in month 37 (again for the sake of example, before you make the 37th monthly repayment)
• You have circa £7665 outstanding on finance (again on the assumption that your monthly repayments are circa £295)
• The cost of the brand new version of the same (or nearest equivalent) vehicle has now increased to £19,500.
• The policy pays the difference between your Motor Insurance payout and the £19,500 replacement vehicle price.
• You use the £19,500 to clear the £7665 outstanding on finance and have £11,835 remaining to put towards the cost of your next car.

Alternative "No-Finance" example - Just like with Invoice GAP insurance, the Replacement GAP insurance policy still works the same way, but you'd have no finance left to clear so all things being well you'd have the whole £19,500 to put towards the cost of the next car.

 

I'm not really sure where the reference to 10yrs has come from.  It's not possible to buy a GAP insurance policy that will cover a 10yr period.  Though in theory, if you could continually renew your GAP insurance policy from the point of initial expiry (e.g. after the initial 3 or 4 year period you purchased) until the vehicle was 10 years old, then yes in principle, either policy would still work the same way.  But, the renewal premium would clearly have to increase each year to account for the underwriter's increasing risk as the potential "gap" (payout) would increase over time as the vehicle depreciates further.

 

For the record, renewable GAP insurance of the ilk I mention above is not widely available.  In fact I only know of one provider who can do this.

 

 

If you don't know already, you should check to see if you're covered on a New-For-Old basis by your Motor Insurer during the first year.  If you are and you're happy with the level of cover they provide (see my previous post) then you could always look to buy a 36 month policy with the start date deferred until the anniversay of the date the vehicle was first registered.  In which case, your 36 month policy would run for years 2, 3 and 4 in terms of the age of the vehicle.  It's normally a no cost option too which means that you get the 4th year covered at no additional cost (e.g. without having to go to the additional expense of a 4-year policy).

 

The other thing is that assuming you went for a 4-year policy from the outset but decided to change your vehicle at the end of the PCP agreement at 42 months.  Depending on how the dates fell you would potentially have 6-months of unused cover.  In these circumstances the better policies will allow you to claim the pro-rata value of those 6-months back and use it against the cost of a new policy on a new vehicle with no cancellation/transfer fees.  Thus, going for the longer duration upfront is not necessarily losing you anything in the long run.

 

What I thought would be a simple 'Tick a Box' policy has certainly changed.

 

Which is why Motor Dealers who continue to sell GAP insurance in a "Tick a Box" manner need to be (as the FCA have already proposed) banned from selling GAP insurance.  It's a relatively simple policy in the grand scheme of things, but it still requires a level of experitse that is rarely demonstrated by Car Salesmen/women.

 

If you wish to PM me with any details then please do so. Being a new forum member myself I am not sure of the rules but I get lots of slapped wrists from the 'Boss' so that would be nothing new!!

 

I'm afraid I'm unable to do this as it would breach the forum rules and wouldn't be fair to Chris Knott and any other official forum sponsor who can offer GAP insurance.  I have though used the forum Contact Form and expressed an interest in sponsoring the forum.  I await admin's response.

 

However my questions are what level of financial 'cover' should I enter?

 

The car RRP £18.301.

deposit paid (Car PX) £5.250

balance on finance £13.051

spread over 42 months with final payment of £6.187.

 

Based on above figures what price to put on the cover?

 

 

I just noticed that nobody appears to have replied to your original question about the level of cover you should choose.

 

If you're looking at Invoice GAP insurance, your Finance Company have already estimated what Claim Limit they think you might need... From an original purchase price of £18,301, they're suggesting the car will be worth £6,187 at the end of the 42 months.  The difference is £12,114.  I.e. they're suggesting that the car will drop in value by £12,114 over 42 months, or, putting it another way, they're predicting that if your car was written off in the 42nd month, an Invoice GAP insurance policy would be required to pay you £12,114.

 

It's not the most scientific way of doing this, granted.  Because of that we don't recommend betting against the Finance House - E.g. our advice is to choose a claim limit equal to or greater than that which the Finance House infers.  In this case for an Invoice GAP insurance policy I'd recommend a Claim Limit of no less than £12,500 (the next level down is usually £10k).  However often, a £15,000 Claim limit can be only a few pounds more expensive so you may prefer to increase to £15k for a belt-and-braces approach.

 

With Replacement GAP insurance, due to the fact that it's not just about how your vehicle will depreciate from its original purchase price, but also about how much the list price might increase, you'd generally have a higher Claim Limit with Replacement GAP insurance in order to allow somewhat of a "buffer" for list price increases above and beyond the "normal" depreciation.  Thus my reccomendation would be to have a Claim Limit of no less than £15k if you go for Replacement GAP insurance.

 

 

Of course the other option, is that you may just require GAP insurance to cover your financial liability to the finance house in the event that the vehicle is written off and the Motor Insurer's payout was not sufficient to clear the remaining balance of the finance agreement.  In which case, if this minimal level of cover is all that you require you could almost certainly get away with a policy with just a £5k claim limit.

 

I hope this helps.

 

David