Hi David.

 

GAP insurance purchased today through a very nice lady in your offices (Name withheld to protect the innocent ! )

 

All I need now is the car.........

 

Regards

 

Alan.

That's great news Alan, thank you!

 

I hope she looked after you well... I taught her everything she knows :-P

 

Not long until you get the car now!

 

 

Thank you to you too tasmanuk - it was a pleasure to talk to you earlier.

 

Regards

 

David

David, how does the position differ for a car that is to be leased? Lower deposit than PCP arrangements and funders appear to have different approaches to the figure owed if car is a total loss. Insurance is old for new but appears not to include leased cars, implying that you would just get a cash settlement instead.

Hi David,

In the process of purchasing a new Octavia vRS TDI, due some point mid March, yet to get a confirmed delivery date. Was debating GAP Insurance and think it is worthwhile given outlay. Policy I was looking at was the replacement vehicle option to cover any increase in prices over the duration I have the vehicle on finance (4 Years). My aim for the cover is that I can get the same car as a replacement should mine be written off, as we only have one car in the household and I need it for commuting to work etc.

 

The car with extras comes in at RRP £26,530. Will need to get invoice amount I am paying from the dealer. But they are offering an additional £4K extra part ex/discount against RRP, which brings the car down to £22.5K but obviously replacement would be more if I couldn't get a similar offer in x period of time should I need to claim.

 

Also my current insurance policy and I have checked does offer new for old in first 12 months,

 

So I am thinking I need GAP cover for 3 years starting at the end of year one and providing cover until the car is paid off at the end of year 4, which has a balloon payment associated with it of just under £10K. Appreciate I need to buy the policy when I get delivery of the car.

 

Can I get a policy to cover my requirements given the additional £4K discount and is that my best option?

 

Many Thx

That is the same situation I was in, Steve, with the new Yeti I collect on Monday having a list price of £3853 more than the invoice price to me.  LV will replace the car with a new one within the first 12 months if the car is stolen and not recovered, or if the cost of repair following an accident is more than 50% of the manufacturer's list price when the damage or loss occurred.  But if a new car of the same make, model and spec is not available in the UK then they would only pay me the invoice price which would leave me significantly out of pocket in that first year.  I discussed Replacement GAP insurance with David of gapinsurance.co.uk and have purchased a 5 year policy with £20,000 of cover.  This caters for future price rises in any replacement car, and likely depreciation of my Yeti over the next 5 years - and crucially also protects me in the event that a replacement is not available in the first year.   Since the possible payout cost to the insurer rises significantly as the car gets older, the premium does increase significantly for a 4th and 5th year of cover.  I strongly recommend that you speak with David to discuss the best way ahead for you and the cost.  I was very happy with what I paid for cover and peace of mind.

 

Denis

Sorry for the delay people... March 1st and all that, things are pretty hectic right now :-)

 

David, how does the position differ for a car that is to be leased? Lower deposit than PCP arrangements and funders appear to have different approaches to the figure owed if car is a total loss. Insurance is old for new but appears not to include leased cars, implying that you would just get a cash settlement instead.

 

Ok, So... you've touched on a few things here... let's start with the easy one first...

 

New-For-Old cover via your Motor Insurance

 

New-For-Old cover from your motor insurer, does not apply to a leased vehicle. This is because, in order to qualify for New-For-Old cover, it will be a requirement that at the time of any Total Loss claim, you must have been and still be the first and only registered keeper of the vehicle (E.g. your details appear on the V5 DVLA registration document).  In the case of a leased vehicle, it's the finance company that remains as the Registered Keeper of the vehicle (on the V5 document), they just happen to permit you to use it.

 

What type of GAP insurance for a Contract Hire (Leased) vehicle?

 

Specifically, you'd consider a Contract Hire GAP insurance policy, which (just like Finance GAP insurance policies of old) would, in the event of a Total Loss claim, pay the difference between your Motor Insurance payout and the settlement figure of the Contract Hire Agreement - the goal being to allow you to walk away at a "zero" position (no car, but no outstanding finance to settle before you can contemplate a new vehicle).

 

In an effort to keep things simple (although arguably confusing matters too), we've chosen to have one single policy which is Finance, Invoice and Contract Hire GAP insurance in one document (our "Invoice GAP insurance policy").  In simple terms, the policy wordings explain that if you're buying the vehicle it's either Finance or Invoice GAP insurance (depending on the best payout for the policyholder at the time of claim) or, if your vehicle is the subject of a Contract Hire Agreement, it becomes Contract Hire GAP insurance.

 

Do you need GAP Insurance for a Contract Hire (Leased) vehicle?

 

It's an absurdly popular misconception that if you're leasing a vehicle you absolutely need to have GAP insurance.  It's simply not the case.

 

Consider.... I was involved in an accident on December 4th last year in my leased vehicle.  My vehicle (along with two others) were written off as a result.  The finance company told me that the combination of what they believed my vehicle was worth and the outstanding rentals that I was liable for, equated to around something like £18,300.  My Motor Insurance company (correctly I should add) valued my vehicle at £15,000 but paid out only £14,900 due to a £100 excess on my policy.  Most people would therefore assume that I was going to have a shortfall to pay (without GAP insurance) of £3,400 however, the finance company invoiced me for £100 (the excess that was deducted).  This was because the terms of the Lease stated that they'd take the payout from my Motor Insurer as full settlement.  They even went on to refund me the two monthly rentals I'd paid since the accident over the time it took for the Motor Insurer to payout.

 

In very basic terms, if you have a Contract Hire agreement and your vehicle is declared a Total Loss before it ends, the Motor Insurer will pay the finance company what they believe the car to be worth and then there are three possible scenarios:

1. The finance company holds you liable for the entire balance of outstanding rentals at the time of loss. This may or may not include a shortfall between what the Motor Insurer paid out and what the finance company believe the car to be worth.
2. The finance company holds you liable for some (it could be a percentage of the entire sum outstanding or a cash value per monthly rental - I spoke to someone not too long ago who'd only have to pay £15 per monthly rental outstanding).
3. The finance company (upon receipt of the Motor Insurer's payout) releases you of any further liability to them and allow you to walk away within nothing further to pay.

Clearly No.1 above is the worst case scenario.  Particularly if the Total Loss occurred within say, a few weeks of you taking delivery of the vehicle.  You'd be pretty miffed if you'd leased the car over 3 years only to have the vehicle written off in the first month and then have the finance company come after you for three years of monthly rentals .  Obviously No.3 is the best case scenario. 

 

You'd want GAP insurance in place if your lease agreement was somewhere between 1 & 2 above.  You clearly wouldn't need GAP insurance if your lease agreement was the equivalent of 3 above.

 

If you're not sure and have access to a scanner, I'd be happy to have you scan and send me a copy of your lease and I can let you have my interpretation of it.  Give me a shout if you'd like me to do this for you.

 

If you'd like me to provide you with a quote for GAP insurance on your vehicle, I'd need to know:

 

• The vehicle value (what would if have cost you if you'd bought it?)
• The structure of your agreement (How many rentals upfront followed by how many monthly rentals)
• How much your monthly rentals are
• The annual mileage limit of your lease agreement.

Cheers

 

David

 

Hi David,

In the process of purchasing a new Octavia vRS TDI, due some point mid March, yet to get a confirmed delivery date. Was debating GAP Insurance and think it is worthwhile given outlay. Policy I was looking at was the replacement vehicle option to cover any increase in prices over the duration I have the vehicle on finance (4 Years). My aim for the cover is that I can get the same car as a replacement should mine be written off, as we only have one car in the household and I need it for commuting to work etc.

 

The car with extras comes in at RRP £26,530. Will need to get invoice amount I am paying from the dealer. But they are offering an additional £4K extra part ex/discount against RRP, which brings the car down to £22.5K but obviously replacement would be more if I couldn't get a similar offer in x period of time should I need to claim.

 

Also my current insurance policy and I have checked does offer new for old in first 12 months,

 

So I am thinking I need GAP cover for 3 years starting at the end of year one and providing cover until the car is paid off at the end of year 4, which has a balloon payment associated with it of just under £10K. Appreciate I need to buy the policy when I get delivery of the car.

 

Can I get a policy to cover my requirements given the additional £4K discount and is that my best option?

 

Many Thx

 

Firstly, in terms of your Motor Insurance providing New-For-Old cover in the first year, assuming you haven't already, please read this: The Perils Of New-For-Old Cover - New for Old schemes are not always what they seem to be.

 

Secondly, you don't need to buy GAP insurance at the time you take delivery of the car.  Your dealer will tell you that because they want you to buy their policy before you discover that you can buy superior cover at a lower price from from an independent provider such as us.  We (and others) permit you to buy GAP insurance within up to 180 days (6-months) of taking ownership of the vehicle.

 

So... assuming you have New-For-Old cover with your Motor Insurer and after researching how good it is (see the article above), it all stacks up and you're comfortable with the cover-level it provides in the first year, in theory you could wait up to 6-months from taking ownership of the vehicle to buy a policy and then at the time of buying it, elect to delay the start date of the policy by up to 12 months from when the vehicle was first registered.  Meaning that yes, you could buy a 3-year policy, covering you only for years 2, 3 and 4 (in terms of the age of the vehicle).

 

In terms of the cover-type... if you bought an Invoice GAP insurance policy (which is almost certainly the type of policy being (or that will be) offered to you by your dealer - even if they do refer to it as Vehicle Replacement Insurance), in the event of a claim, it will only be aiming to get you back up to the original £22,500 OTR price that you bought the vehicle for first time around.

 

The policy you require in order to cover you up to the manufacturer's list price for buying a brand new version of the same (or nearest equivalent) vehicle at the time of claim, is Replacement GAP insurance.  However this is a policy that pays out in cash and subject to if/when a claim happens, there'd be finance left to clear.  So, for clarity, if your car was written off, your Motor Insurance pay out what they believe the car to be worth, we top that up (subject to the policy claim limit) to the cost of the manufacturer's list price for a brand new version of the same (or nearest equivalent) vehicle at the time of claim.  The combined sum is used to settle any remaining finance secured on the vehicle (in practice it's likely the finance company will insist they get paid first and you only receive the surplus funds) and then you'd dispose of the funds as you saw fit... e.g. you can buy any vehicle from any dealership of your choice (we make no stipulation as to what you need to buy or from where).

 

If your vehicle has a current list price of £26,530 and a final residual/balloon value of £10,000 at the end of the four year PCP agreement, I'd suggest that whether you go with 3-year (deferred by 1) or a 4-year policy, you should be looking at a policy Claim Limit of £17,500 or higher, though ideally at least £20,000.

 

The reason is that, one way to look at the PCP agreement is that the finance house is suggesting that the car may drop in value from today's list price by up to £16,500.  Our own claim statistics however show that the average vehicle will drop in value by between 50% and 70% over a three year period, which with a list price of £26,500 today would equate to a potential depreciation range of between £13,250 and £18,550.

 

Consequently £17,500 as a Claim Limit appears a reasonable choice, however, this is just looking at by how much the car might drop in value from today's list price.  It's not giving any consideration to the fact that the list price at the time of claim (e.g.if you had a claim in the last few days of the four year policy) could be greater than £26,500... £17,500 as a claim limit therefore begins to look a little ambitious.

 

However it makes comparatively little difference to the cost of the policy, to give you an idea, based on a car purchased for £22,500 and after applying your 10% forum discount, the following prices would apply:

 

3yr Replacement GAP insurance

 

£17,500 Claim Limit = £135.70

£20,000 Claim Limit = £145.60

£22,500 Claim Limit = £162.94*

 

4yr Replacement GAP insurance

 

£17,500 Claim Limit = £167.49

£20,000 Claim Limit = £173.79

£22,500 Claim Limit = £210.11*

 

* - Note that with this option, the policy Claim Limit matches the original OTR of the vehicle.

 

Coming back to the issue of New-For-Old cover... If you consider the prices above, the cost of the 4yr £20k policy for example, is just £28.19 more expensive than the 3yr equivalent... you can spend the time researching the intricacies of your Motor Insurance policy and fighting with them to get a clear answer, or you could pay £28,19 extra and have the cover in place regardless.

 

I hope this helps.

Best wishes

 

David

Incidentally Steve, what part of Warrington are you at?  I basically grew up in Warrington... initially in Callands but then Orford followed by Culcheth (my parents had a pub there) and then Birchwood.  My parents had one of the pubs in the Town Centre for a while too: Time Square (although it changed it's name to Bar Tempo when they initially took it over).

 

Was gutted to hear recently that Mr Smiths is going to become apartments... I lost many nights in that place! :-)

David, I'll check with my current insurance company tomorrow to fully understand what their new for old cover actually covers.

I'm in Woolston, now live less than a mile from where I was born in Paddington, grew up in Grappenhall.

As for Mr Smiths spent many a night in there myself in the 80s & 90s. But it's been saved now, turning it to some kind of youth Community centre

Sent from my iPhone using Tapatalk

Hi David

Many thanks, will scan docs etc when in office tomorrow. I rang the lease company directly to clarify their term which was ' written down value' but no one could give me an indication of what it was at the present time to help my understand what this figure is likely to be. It seems from the figures quoted for others that the difference in an extra 5k is quite small and most likely worth paying the extra.

Regards

David, I'll check with my current insurance company tomorrow to fully understand what their new for old cover actually covers.

I'm in Woolston, now live less than a mile from where I was born in Paddington, grew up in Grappenhall.

As for Mr Smiths spent many a night in there myself in the 80s & 90s. But it's been saved now, turning it to some kind of youth Community centre

Sent from my iPhone using Tapatalk

 

I've got relatives on Manchester road in Woolston.  Small world!  Their house backs on to a school playing field (or at least it did - I've not been there for quite a while) and I'd spend ages playing on the field whenever I was there.  One time (maybe around 11/12yrs old) I was approached by another lad who asked me if I'd be his girlfriend... confused, I pointed out that I was male... he made his excuses and left pretty sharpish... and I went straight inside to my Mum and demanded that I wanted my (then rather long as I wanted to look like a "surfer-dude") hair cutting as soon as possible :-)  My dad dined out on that, at my expense, for years.

 

Glad to hear that Mr Smiths has been saved!

Let me know what your Motor Insurer says and if you get any strange answer(s) give me a shout.

 

Hi David

Many thanks, will scan docs etc when in office tomorrow. I rang the lease company directly to clarify their term which was ' written down value' but no one could give me an indication of what it was at the present time to help my understand what this figure is likely to be. It seems from the figures quoted for others that the difference in an extra 5k is quite small and most likely worth paying the extra.

Regards

 

Indeed, although it's not worth paying any extra if you're not likely to need GAP insurance at all :-)

 

I look forward to seeing your docs and advising accordingly.

 

Best wishes

 

David

David,

Spoke with my insurance company, and to be honest wasn't convinced with their answers even though I quote word for word your three questions. So requested my policy document, applicable sections below:

 

2.2     Total loss

We will normally declare your vehicle a total loss:

• If we deem the cost of repairing your vehicle as uneconomical; or

• If your vehicle has been stolen and not recovered.

If your vehicle is declared a total loss as a direct result of an insured event (as above), we will offer you a monetary amount as compensation. The maximum amount we will pay is the market value of your vehicle, less any policy excess which is applicable (see Sections 2.9 and 2.10). If you owe us an outstanding amount under this policy when the claim has been made, you must pay this amount in full before we can settle the claim.

 

And the new for old part:

 

2.6       Vehicle recovery

We will, at your request, replace your vehicle with another of a similar make, model and specification following an incident covered by Section 2 provided that all of the following applies:

i.  You are the first registered owner of your vehicle from new;

ii. Your vehicle is no more than 12 months old from the date of first registration;

iii. The repair costs exceed 60% of the market value of your vehicle;

iv. We have permission from any person that has a financial interest in the vehicle;

v. Your vehicle is not subject to a lease or contract hire agreement or any other similar arrangement.

 

Therefore I don't feel it gives me what I want, plus it ties me to my insurance company as my policy is due for renewal early April.

 

Spoke to the dealers to get the invoice value which is after the £4K discount is £22,361.41 which includes the options I have added to the vehicle. I should also be picking the vehicle up on 14th March.

 

So what I am looking for is cost for 3 and 4 years of GAP Insurance to cover replacing the vehicle with the same specification vehicle, which I want to run and cover from me collecting the vehicle or very soon after.

 

Many Thx

I'm sorry Steve - somehow I missed he notification of your reply in this thread.
 
To be honest, based on what you've posted your Motor Insurance wording doesn't look too bad.
 

David,
Spoke with my insurance company, and to be honest wasn't convinced with their answers even though I quote word for word your three questions. So requested my policy document, applicable sections below:

2.2 Total loss
We will normally declare your vehicle a total loss:
• If we deem the cost of repairing your vehicle as uneconomical; or
• If your vehicle has been stolen and not recovered.
If your vehicle is declared a total loss as a direct result of an insured event (as above), we will offer you a monetary amount as compensation. The maximum amount we will pay is the market value of your vehicle, less any policy excess which is applicable (see Sections 2.9 and 2.10). If you owe us an outstanding amount under this policy when the claim has been made, you must pay this amount in full before we can settle the claim.

The above is pretty standard stuff.  However it would be useful to know what they would constitute (in terms of the cost of a repair) as "beyond economical repair".  For example below, they go on to say the bit I've highlighted red.  Ideally, what you would NOT want, is them being able to declare the vehicle beyond economical repair if say, the cost of repair equated to more than 50% of the Market Value of the vehicle whilst they only entertain giving you a new-for-old replacement if the cost of repair exceeded 60% of Market Value - that 10% difference (assuming it exists) could come back and bite you (assuming you'd delayed the start date of a GAP insurance policy).
 

2.6 Vehicle recovery
We will, at your request, replace your vehicle with another of a similar make, model and specification following an incident covered by Section 2 provided that all of the following applies:
i. You are the first registered owner of your vehicle from new;
ii. Your vehicle is no more than 12 months old from the date of first registration;
iii. The repair costs exceed 60% of the market value of your vehicle;
iv. We have permission from any person that has a financial interest in the vehicle;
v. Your vehicle is not subject to a lease or contract hire agreement or any other similar arrangement.

The only thing they don't seem to say above, is what happens if you DO qualify for a New-For-Old replacement vehicle but, they cannot source one at the time of claim.  Some will only pay you the Market Value of your car (you'd need GAP insurance), some will pay you back the original purchase price (you *may* not need GAP insurance) and others will pay you the full manufacturer's list price of the brand new vehicle and leave you to source your own (you probably wouldn't need GAP insurance).  Without it being explicitly defined in their wordings, my assumption would be that they'd revert to a Market Value payout, but it may be worth pushing them for an answer (if you haven't already).
 

...plus it ties me to my insurance company as my policy is due for renewal early April.

 
Not necessarily.  Motor Insurance policies that include a New-For-Old feature, cover a brand new vehicle on a New-For-Old basis so long as at the time of claim you were (and still are) the first and only registered keeper, the vehicle is still less than 12 months old, any finance company agrees (what company wouldn't agree to getting a newer vehicle back than they originally anticipated?) and that the cost of repair exceeds whatever threshold they set down.  This of course means that it doesn't matter when you bought the policy in terms of the age of the car... e.g. if you bought your policy after having already owned the vehicle for 11 months, but a write-off occurred just before it turned 1yr old, if that motor insurance policy included New-For-Old cover and you met the qualifying criteria it'd be handled accordingly.
 
Thus, all it ties you to (assuming you went down the route of delaying a GAP insurance policy start date) is to ensure that whatever new policy you take out also incorporates New-For-Old cover for a vehicle that you bought brand new.  However even that isn't set in stone...
 
If you bought a policy from us and delayed the start date until March 14th next year, at any time before that policy starts you can elect (free of charge) to amend the policy start date and have it start sooner if you require.  Equally within the first 30-days the opposite is true.  Buy a policy and have it start on March 14th this year and you get a 30-day cooling off period during which (assuming no claim has been made) you can make virtually any change to the policy and if you came back to us before April 14th having found a Motor Insurance policy that provides New-For-Old cover that you're satisfied with, you could elect (again free of charge) to revise the policy start and end dates so that it becomes a deferred policy.  To be fair you could do the latter any time within the first 6-months, it's just that after the first 30-days you'd lose some of what you'd paid for the policy first time around on a monthly-pro-rata basis.
 

the invoice value which is after the £4K discount is £22,361.41 which includes the options I have added to the vehicle. I should also be picking the vehicle up on 14th March.

So what I am looking for is cost for 3 and 4 years of GAP Insurance to cover replacing the vehicle with the same specification vehicle, which I want to run and cover from me collecting the vehicle or very soon after.

Ok, so... the type of policy you refer to is our Replacement GAP insurance policy which, in the case of a vehicle you bought brand new (1st keeper etc) and that vehicle being declared a Total Loss (written off) within the policy term will pay the difference between your Motor Insurance payout and what it would cost to replace the vehicle with a brand new version of the same (or nearest equivalent) vehicle at the time of claim - even if that replacement vehicle costs more than you bought the vehicle for first time around.  In addition there's an Invoice GAP insurance safety net meaning that in the unlikely event that the replacement vehicle at the time of claim on sale for less than what you bought the vehicle for first time around, the policy will revert to Invoice GAP insurance and pay the difference between your Motor Insurance payout and the original purchase price you bought the car for.

 

Prices:

 

Prices vary depending on the policy type, duration and claim limit.  I've listed the variations below as examples, but note that other claim limits (etc) are available.

 

3yr Replacement GAP insurance, £17,500 Claim Limit = £150.78 less 10% discount comes to £135.70

3yr Replacement GAP insurance, £20,000 Claim Limit = £161.78 less 10% discount comes to £145.60

 

4yr Replacement GAP insurance, £17,500 Claim Limit = £186.10 less 10% discount comes to £167.49

4yr Replacement GAP insurance, £20,000 Claim Limit = £193.10 less 10% discount comes to £173.79

 

Further note that these prices are for the specified duration and (as mentioned above) that it's a no-cost option to defer the start date by up to a year from first registration so, for example, a 3yr policy at £145.60 could be for a policy running for years 1, 2 and 3 OR years 2, 3, and 4.  Conversely, the four year policies can be for years 1, 2, 3 and 4 OR years 2, 3, 4 and 5.

 

Any further questions, just ask.

 

Cheers

 

David