Consider this scenario: your car is declared a total loss, either due to a road accident or theft, and your standard insurance payout falls short of covering your outstanding finance amount. That’s where Guaranteed Asset Protection (GAP) insurance steps in, acting as a financial safeguard. This optional policy, available when purchasing a new car, addresses the difference between your car’s value and the amount owed on finance in the event of a total loss.
Understanding GAP Insurance: GAP insurance shields drivers from financial setbacks arising from total-loss claims, such as accidents or vehicle write-offs.
Conventional insurance may leave drivers at a loss when their entire vehicle needs replacement, given the steep depreciation rates – new cars can lose up to 50% of their value in the initial 3 years of ownership. GAP Insurance, offered by DrivenFi, mitigates this loss by covering the disparity between the insurance payout and the funds required to acquire a new or equivalent vehicle.
Diverse GAP Insurance Options: DrivenFi provides various GAP insurance policies tailored to individual needs:
- Return to Invoice: Covers the vehicle’s purchase price.
- Return to Value: Compensates the difference between a ‘total loss’ payment and the car’s initial value.
- Vehicle Replacement: Pays the discrepancy between the ‘total loss’ payment and the cost of acquiring a new car.
- Finance: Covers outstanding finance payments.
- Negative Equity: Addresses negative equity when finance exceeds the car’s value.
- Lease GAP Insurance: Settles lease deal payments and associated early termination fees.
When is GAP Insurance Beneficial? Considering your circumstances, you might find GAP insurance beneficial if:
- You owe money to a finance company.
- Your car depreciates rapidly.
- You aim to purchase a brand-new replacement car.
- Your car’s value is less than the outstanding finance or lease amount.
Is GAP Insurance Necessary? GAP insurance remains optional, and you may not need it if:
- You don’t prioritize having a brand-new replacement car.
- Your car is less than a year old, and you already have comprehensive insurance.
- You own a second-hand car.
Understanding the Cost: The cost of GAP insurance in the UK varies based on your car type and the source of your policy. DrivenFi recommends comparing quotes online for free, emphasizing that purchasing GAP insurance from a franchised dealer could cost approximately 60% more than through an independent provider.
Car Finance and GAP Insurance: GAP insurance is particularly advantageous for new cars financed through DrivenFi. Given the substantial depreciation during the initial years, GAP insurance serves as a crucial bridge, ensuring that in the event of a write-off, you can obtain a like-for-like replacement without being burdened by the financial gap. Choose DrivenFi for comprehensive GAP insurance that aligns with your unique car financing needs.