Just ordered a VRS on lease. Total cost of 3 year deal is around £10,000. A 3 year old VRS with relatively low mileage will surely never be worth less than that? My logic is that the insurance company will always pay out more than the remaining amount.

 

Claim at start of lease: Insurance company pays out full value (~£26k) > £10k remaining on lease.

Claim in penultimate month of lease: Insurance company pays out £10k > £200 remaining on lease.

 

Have I missed something?

May be, but the insurance company’s maths are based on what it considers to be the market value of your car at the time of an incident, not a metric related to your finance deal.

Also don't forget that the insurance company's sole aim in life is to not pay out wherever and whenever possible.

Gap should only cost you between £100 and £200 tops on this, which should cover deposit and monthly payments remaining and any gap to car value - imho not a risk i would think is worth taking.

 

like any insurance, you’d hope it’s a waste of money ultimately.

 

 

 

 

 

 

 

Only you can make the decision but I'd take the gap insurance, it's probably about £100 for 3 years cover with ALA. 

 

Also did you take a PCP rather than lease? Leases over 3 years aren't the norm

Edited 26 January, 20188 yr by ahenners

13 minutes ago, ahenners said:

Also did you take a PCP rather than lease? Leases over 3 years aren't the norm

 

Our current lease is 3 years and next one is 3 years - slightly lower amortised monthly payments than 2 years, and 4 years is slightly cheaper again.

15 minutes ago, ahenners said:

Only you can make the decision but I'd take the gap insurance, it's probably about £100 for 3 years cover with ALA. 

 

Also did you take a PCP rather than lease? Leases over 3 years aren't the norm

 

Thanks for the advice. Yeah, it’s a lease. Any reason they aren’t they the norm?

1 minute ago, Ekion said:

 

Thanks for the advice. Yeah, it’s a lease. Any reason they aren’t they the norm?

 

I've never seen a 3 year deal on a lease, it always seems to be 2 years. Though I'm not an expert on leasing by any means...

 

As @Exeterj posted, if it works better for you over 3 then it's all good 

19 minutes ago, Ekion said:

 

Thanks for the advice. Yeah, it’s a lease. Any reason they aren’t they the norm?

 

Generally i think people like to change cars more often in a leased car, but for me as i don't change cars a lot, its also about amortised monthly figures i.e. total deposit plus monthly divided by the term to give 'real' / comparative cost per month - when i last looked the figures made about 20-30pounds per month difference (cheaper on 3yr term to 2yr), hence you'd pay approx 600 more over a 2 year term to have the benefit of changing cars earlier (in theory if you went and got another lease on same terms, if that makes sense).

Edited 26 January, 20188 yr by Exeterj

3 year lease is becoming more popular, my next car is on a 6+35 lease profile. Current 2 year lease seemed to go by quick so want something longer this time and it was cheaper then 2 years. 

I’d always recommend return to invoice GAP cover on any car worth more than a few grand, it can come in very handy. As mentioned, your regular insurance company go on market value alone and don’t give a stuff how you’ve funded the car. If I were to have to make a claim on the Citigo I would say the market value of a Jan 17 registration 16MY Citigo MC with 11k on the clock would be £7-7.5k. List price is £11k before discounts. Even with the discount I had, the car is still in negative equity today, and will be until about 30 months into the PCP. Let’s say that car is written off. Insurance will pay out £7-7.5k but I’d be liable for the probably £500-1000 negative equity on the PCP, though it’s 0% and I got a healthy discount so it may be at the lower end of that figure. With GAP cover, I won’t be, they will be. With the Octy the case is easier to make as it was bought on HP with a 5.9% interest rate so I’ll be in negative equity almost all the way if I don’t over pay the monthly repayment. I selected £7k of cover for that as there won’t be that much difference between market value and loan value across the term of the loan. You don’t need to insure the whole value of the car. That cost me £97 for 4 years of cover with ALA. You’d hope never to need it, but if you do, it’s there and you’d be amazed at the joke valuations insurance companies will try and offer you.

Edited 26 January, 20188 yr by SashaGrace

I've just had a look at some figures on the GAP (as its close to my heart with a Golf R new lease looming and the risk of getting it nicked high!) and i think the issue is that the lease payments are always 'racing' the depreciation rate - on a graph the lease payments would be a straight line reducing the amount of finance owed, and the market value is a curve dropping steeper at the start.

 

Year 1 is likely to be ok, as many insurance companies 'replace for new' but after that the market value given will be significantly lower and will be a cliff edge in the insurance payout. The other issue is that the lease company buy the cars as significant discount and thus the monthly lease payment can be 'keener' than the depreciation rate in the first place.

17 minutes ago, SashaGrace said:

I’d always recommend return to invoice GAP cover on any car worth more than a few grand, it can come in very handy. As mentioned, your regular insurance company go on market value alone and don’t give a stuff how you’ve funded the car. If I were to have to make a claim on the Citigo I would say the market value of a Jan 17 registration 16MY Citigo MC with 11k on the clock would be £7-7.5k. List price is £11k before discounts. Even with the discount I had, the car is still in negative equity today, and will be until about 30 months into the PCP. Let’s say that car is written off. Insurance will pay out £7-7.5k but I’d be liable for the probably £500-1000 negative equity on the PCP, though it’s 0% and I got a healthy discount so it may be at the lower end of that figure. With GAP cover, I won’t be, they will be. With the Octy the case is easier to make as it was bought on HP with a 5.9% interest rate so I’ll be in negative equity almost all the way if I don’t over pay the monthly repayment. I selected £7k of cover for that as there won’t be that much difference between market value and loan value across the term of the loan. You don’t need to insure the whole value of the car. That cost me £97 for 4 years of cover with ALA. You’d hope never to need it, but if you do, it’s there and you’d be amazed at the joke valuations insurance companies will try and offer you.

 

I completely understand taking it out on PCP, but this is a straight lease, which would be very difficult to get into negative equity with over 3 years. If I claimed on my insurance 1 year into my lease then I only have 5k of payments left, so as long as the payout is more than that, no gap is needed surely? This logic works all the way through, too. The car will never be worth less than the amount I owe at any point over the 3 years. For information, my lease is £2400 deposit, £200pcm.

Edited 26 January, 20188 yr by Ekion

4 minutes ago, Ekion said:

 

I completely understand taking it out on PCP, but this is a straight lease, which would be very difficult to get into negative equity with over 3 years. If I claimed on my insurance 1 year into my lease, and the car was worth 16k, I only have 5k of payments left - no gap needed, surely? This logic works all the way through, too. The car will never be worth less than the amount I owe at any point over the 3 years. For information, my lease is £2400 deposit, £200pcm.

 

Its not about what the car is worth, its about how much the funding company is making. If the car is worth (you get insurance payout) 16k after 1 year and you've paid 5k then you'll pay the finance company 21k for the car - can't see them accepting that. Whats the list for a vRS 25-26k? - they'd want to make this plus possibly some margin? Technically you could carry on paying the finance to cover the gap but then you have no car for 2 years.

 

Got it! Was looking at this from totally the wrong angle. Thanks!

12 minutes ago, Exeterj said:

 

Its not about what the car is worth, its about how much the funding company is making. If the car is worth (you get insurance payout) 16k after 1 year and you've paid 5k then you'll pay the finance company 21k for the car - can't see them accepting that. Whats the list for a vRS 25-26k? - they'd want to make this plus possibly some margin? Technically you could carry on paying the finance to cover the gap but then you have no car for 2 years.

 

 

I'd second that, the terms of a VW finance lease basically say that in the case of total loss any payout by your insurance company is owed to them (except personal item claims) in full. The remainder of the lease payments is still owed regardless, i believe the gap insurance is covering your remaining payments.

14 minutes ago, Ekion said:

Got it! Was looking at this from totally the wrong angle. Thanks!

 

Takes some getting head around, I didn't even think about it for our current lease, but certainly will on the new one.

 

2 minutes ago, dkvinyls said:

The remainder of the lease payments is still owed regardless, i believe the gap insurance is covering your remaining payments.

 

I think you do need to take contract hire / lease gap insurance so with this i think it covers remaining payments/debit settlement balance and also any gap left between this and the current insurance value. It also seems worth getting a deposit covered, as to replace the car with new lease you need to find the deposit again (not so much problem nearer the end of the lease but 1 year in would be a pain).

11 hours ago, ahenners said:

 

I've never seen a 3 year deal on a lease, it always seems to be 2 years. Though I'm not an expert on leasing by any means...

 

As @Exeterj posted, if it works better for you over 3 then it's all good 

 

Most leases last between 1-4 years, that's fairly standard.  A lot of people go for 2-3 years because it's the best balance between monthly payments and being able to change the car regularly.  Some leasing websites I've been on seem to default to 2 years when you look to get a quote which could be why, although many allow you to change it to between 1-4.

 

With regards to GAP insurance I'd never lease a car without it - cover is cheap enough to buy as long as you don't buy it from the dealer or leasing company.  I get your logic, but for added peace of mind it's not a lot to pay in the grand scheme of things

Edited 27 January, 20188 yr by jtalep

3 years would generally be the sensible option for a lease - you get the most out of slightly cheaper payments and your warranty (for the practical minded person!).

If you’ve leased the vehicle with VWFS then you need* Contract Hire GAP insurance which, in the event of write off, will aim to pay the difference between your motor insurance payout and the amount required to settle the remaining balance of the contract hire agreement (Albeit usually excluding maintenance, excess mileage charges and arrears etc).

 

You can also pay a small additional premium to ensure that in the event of a total loss claim, the GAP insurance will refund you the initial payment that you put down, for you to then use against the cost of replacing your car.

 

However you have understood the cover correctly.  Your liability to the finance company on a lease agreement, decreases over time as you pay your monthly rentals, therefore the potential payout from a Contract Hire GAP insurance decreases over time too.

 

This is the opposite of what happenes with an Invoice or Replacement GAP insurance policy on a vehicle that you’re buying, because with those the gap (and therefore potential payout) increases over time.

 

Check us out at www.gapinsurance.co.uk or give us a call on 01484 490095. BRISKODA members get 10% off all of our products (e.g. Scratch & Dent, Tyre and Alloy Wheel Insurance too) using discount code “BRISKODA10”.

 

 

 

* = Some lease agreements from some finance companies don’t require GAP insurance at all.  If you’re unsure please get in touch.

As an aside... the considerable majority of lease agreements that I’ve ever seen (I’ve been selling GAP insurance since 2004 and prior to that sold car finance/lease agreements for circa 4 years and sold cars for 2 years prior to that) so I’ve seen many... have been for 3yr durations.

3 hours ago, David@GAPInsurance said:

If you’ve leased the vehicle with VWFS then you need* Contract Hire GAP insurance which, in the event of write off, will aim to pay the difference between your motor insurance payout and the amount required to settle the remaining balance of the contract hire agreement (Albeit usually excluding maintenance, excess mileage charges and arrears etc).

 

You can also pay a small additional premium to ensure that in the event of a total loss claim, the GAP insurance will refund you the initial payment that you put down, for you to then use against the cost of replacing your car.

 

However you have understood the cover correctly.  Your liability to the finance company on a lease agreement, decreases over time as you pay your monthly rentals, therefore the potential payout from a Contract Hire GAP insurance decreases over time too.

 

This is the opposite of what happenes with an Invoice or Replacement GAP insurance policy on a vehicle that you’re buying, because with those the gap (and therefore potential payout) increases over time.

 

Check us out at www.gapinsurance.co.uk or give us a call on 01484 490095. BRISKODA members get 10% off all of our products (e.g. Scratch & Dent, Tyre and Alloy Wheel Insurance too) using discount code “BRISKODA10”.

 

 

 

* = Some lease agreements from some finance companies don’t require GAP insurance at all.  If you’re unsure please get in touch.

 

You dont “need” GAP insurance with VWFS at all - my agreement was with VWFS and at no point was I told I had to have GAP.

1 hour ago, GoneToBeemer said:

 

You dont “need” GAP insurance with VWFS at all - my agreement was with VWFS and at no point was I told I had to have GAP.

 

Sorry... I could have been clearer.

 

I meant that you need Contract Hire GAP insurance rather than the Invoice GAP insurance discussed earlier in this thread - e.g. you can’t have Invoice GAP insurance for a leased vehicle.  I did not mean that it is in anyway compulsory - as I fear you may have interpreted.

 

That said, if you have a lease with VWFS and you don’t have GAP insurance then you’re technically at risk of potentially having to dip in to your own funds should your vehicle be written off.

 

If your vehicle is written off, roughly speaking, VWFS will calculate the settlement figure as the combined sum of:

 

* what they think your car is worth, plus

* the sum of all rentals not yet paid, plus

* any arrears, excess mileage fees etc, plus

* admin fee for wrapping the agreement up, less

* a discount (I think it’s 4% per annum) for settling early

 

(If I remember correctly this is discussed in section 8.2 of the VWFS lease agreement - I was looking at this part of my own lease agreement with them last week) 

 

Separately, your motor insurer will calculate what THEY think your car is worth and that amount will be paid to VWFS.

 

If your motor insurance payout falls short of the VWFS settlement figure, VWFS will hold you liable for the whole shortfall (some other companies hold you liable for a portion of it. Other companies hold you liable for none of it).

 

If being at such risk is of concern, therein lies a “need” and Contract Hire GAP insurance can see to that for you (although it wouldn’t cover costs for arrears or excess mileage etc)

 

If being at such risk is not of concern (e.g. you could comfortably pay any shortfall yourself) then clearly you wouldn’t “need” GAP insurance but you might well still consider the risk/reward of buying it in order to avoid a large and unexpected financial outlay whilst also needing to budget for a new car to replace the one written off.

 

Sorry for the confusion. I hope I’ve now cleared that up.

Edited 27 January, 20188 yr by David@GAPInsurance

Does that apply only if the write-off is your fault?

If someone else smashes into me, writes my car off and there is a GAP, who pays it?

I’ve got combined gap on mine, through my usual broker, so it will payout for a new car or settle the finance, which ever is higher. I tend to over pay and take as little finance as possible, so my rough calculations have worked out I shouldn’t be in negative equity, but I& 5be car is written off I’d rather get another new one instead of trawling autotrader for something with the spec I want.