Hi all
Picked up my new Mazda 2 yesterday; a month late but very welcome. The dealer offered me a gap insurance policy, which i had never heard of before, and it was on a 'today and today only' basis. Now i am usually very cynical about these kind of deals; extended warranties etc. but this seemed a good deal; for a one off payment of £300 i got 3 years cover, so that in the event of theft or write off i would get the full purchase price of a new replacement. So i went for it. Did i do wrong?
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Paid £172 from a well known company, 3 years cover back to invoice stuff all pretty straightforward - online.
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You should know if you did the right thing after the sales presentation to you. The Mazda dealer should have asked you certain questions to work out whether you need it or not.
On the recent purchase of our Honda Jazz, GAP insurance was very well explained and we were not given the hard sell. If anything Honda were excellent in their explanation of it, we did not take up the insurance and that was that.
I think it comes down to the purchase price of the car and if it does unfortunately get written off are you prepared to accept the market value after the car has depreciated or would you like the purchase price that you paid say 3 years earlier. It's probably of more relevance on more expensive (20k +) vehicles that have higher initial depreciation.
eg.
1. Honda Jazz, purchase price say 10k. written off in 3 years value say 6k. GAP insurance pays out the 4k to make the 6k up to 10k
2. Landrover Discovery, purchase price say 25k. written off in 3 years value say 12k. Gap insurance pays out 13k to make uo the 12k to 25k.
It's your choice........
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My father in law purchased a stand alone gap insurance policy covering a potential loss of £15000 maximum(the difference between the invoice price of the car and the price the insurance will pay if the car is a total loss) for £127.00. The maximim cover he could find was for 3 years.
The dealer was trying to sell him an inferior policy for £350.00
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1. Honda Jazz purchase price say 10k. written off in 3 years value say 6k. GAP insurance pays out the 4k to make the 6k up to 10k 2. Landrover Discovery purchase price say 25k. written off in 3 years value say 12k. Gap insurance pays out 13k to make uo the 12k to 25k. It's your choice........
But... that's not how GAP insurance works. GAP pays the difference you owe on finance (or what their settlement figure would be in case of total loss) and insurance valuation at point of accident not the original price. So your examples should look like this:
1. You bought overvalued three year old Honda Jazz for 10k, using insanely long finance with monthly payments of £166 over 60 months . Written it off in 3 years, insurance is willing to pay 1k using Glass's for valuation for what then is almost 7 year old car, meanwhile you still owe over £4000 to finance company because you took out unrealistic HP and inflation was higher than your repayments. GAP pays that difference.
2. You bought three year old Landrover Discovery 3 for 22k. You haggled and took realistic finance of £350 a month over 60 months. Written off after a year. Insurance company values the car at £17,900. And after 12 months you only owe £17,800 to finance people. GAP pays zero. Zilch. Nada.
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[ Anything I drive can and will be used against me ]
Edited by v0n on 02/12/2007 at 14:03
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But... that's not how GAP insurance works. GAP pays the difference you owe on finance
Are you saying vOn that if there is no finance at all on the car (as in my case) that there is no reason to have gap insurance? Because that's not how it was explained to me. Wouldn't it still be in my interests to get £10,000 if it was written off in 2-3 yrs time, rather than £5,000 ish, regardless of whether there is outstanding finance or not?
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Wouldn't it still be in my interests to get £10 000 if it was written off in 2-3 yrs time rather >> than £5000 ish regardless of whether there is outstanding finance or not?
That's RTI - Return To Invoice, which has become known as GAP-RTI.
Finance GAP only covers any outstanding finance.
Clearly if you're unfortunate enough to have your car written off then you would be very glad to have taken out RTI cover - it's just that writing off a less than 3yr old car (especially a more expensive one) is a pretty rare event.
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Are you saying vOn that if there is no finance at all on the car (as in my case) that there is no reason to have gap insurance? Because that's not how it was explained to me. Wouldn't it still be in my interests to get £10 000 if it was written off in 2-3 yrs time rather than £5 000 ish regardless of whether there is outstanding finance or not?
GAP only covers the difference between the depreciated insurance payout value of the car and outstanding loan or hire purchase balance. If there is no finance involved there is no reason to take it.
If it worked like you described you would see a lot of people conveniently writing off their old cars to get massive GAP payouts. Suddenly a month before end of finance your car would be worth £1000 to sell on or £9000 to be written off...
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[ Anything I drive can and will be used against me ]
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Did i do wrong?
If you did, so did I. on my Mitsubsihi Colt. I can't see anything wrong with Gap but would ne interested to hear from anyone making a claim under the scheme.
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Bear in mind there are different kinds of GAP cover - You really only "need" it if you buy the car heavily financed and you couldn't afford to pay off the finance if the car was written off early on in the deal.
Bear in mind that most insurance companies replace written off cars with new for the first year (some for two) anyway.
The Return to Invoice gap cover would obviously come in very handy if the car was written off at, say 2.5yrs old, but you tell can how unlikely that is by how low the on-line premiums are.
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>>> - You really only "need" it if you buy the car heavily financed and you couldn't afford to pay off the finance if the car was written off early on in the deal.
That's not what made me go for it, there is no finance on the car. I saw it as a relatively cheap way to get the money for a new replacement instead of much smaller sum based on my insurers valuation of the car, which even after one year would doubtless be significantly less than the purchase price, let alone at 2 or 3 years. Having said that given the prices that people have quoted for online policies i'm starting to think i DID do wrong to go for it, so i'm going to try to cancel it.
Thanks for advice.
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dont you get a new car if written off at up to two years old anyway,so your gap insurance is only any use between 2 and 3 years old
or have I got it wrong?
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dont you get a new car if written off at up to two years old anyway so your gap insurance is only any use between 2 and 3 years old or have I got it wrong?
If you have so have i, we didnt go for the gap because of that very reason.
Hope some insurance expert can give us the truth and nothing but.
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When I bought my Audi I declined GAP immediately, but due to FSA regulation I had to have each type explained. Finance gap didn't apply to me as I only borrowed a fraction of the purchase price payable over a short period so the car will always be worth more than the outstanding finance.
Return to invoice was also offered, but my fully comp insurance covers me for a new car should my car be written off in the first 12 months so any gap would only cover me for the time after this. It was also over £300 for three years and on line it's half this cost.
I can see this insurance coming under the spotlight of FSA and insurance ombudsman in the future, just as travel insurance is as both are sold in what can be a pressured environment. When we went to a Toyota dealer for an Aygo quote GAP and a bit of polish (supaguard or similar) were both automatically included in the OTR price (adding 10% to the cost)- very sneeky and one reason we walked. I know car dealers can have underhand tricks, but this was too blatant.
I'd advise the OP to read the policy carefully, see if there is any cooling off period and look for a cheaper alternative if they think it is needed.
Edited by daveyjp on 02/12/2007 at 19:07
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When I bought my Audi I declined GAP immediately but due to FSA regulation I had to have each type explained.
BS of course. Arguably they should ask if you're interested but if you aren't they are under no obligation to subject you to the full script. I doubt that GAP will come under scrutiny anytime soon - the OFT, CC and FSA have their hands full with PPI at the moment.
Meanwhile, online is the way to go, as you suggest.
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I know the salesman well, so no BS - it wasn't a full script, jsut a quick overview, but forms were still filled out to say I'd been "advised".
The FSA form was all part of the handover pack and his paperwork. It took a while to fill in and I'm sure if a simple "no" from me meant he didn't have to fill the forms out he would have been thankful, but it all had to be completed.
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Just to put GAP insurance in context my Alliance & Leicester personal loan taken out to buy SWMBO's new car came with £5k of GAP insurance (non-RTI) for free. By free - there was no extra charge and the interest rate was the lowest on the market at the time.
Shows how often they expect to pay out!
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Rule of thumb is if a car salesmen is selling you it then its a bad deal ands can be had cheaper else where just like the magic snake oil called scotgaurd they love to sell.
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the magic snake oilcalled scotgaurd they love to sell.
Is this something that protects your car north of the border?
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Bought the dealers expensive RTI gap 2 1/2 years ago with her second Audi 0- we were new to it as well.
Car written off last July, she bought an EOS, ran it for a year and has just changed it for a new Corsa - we are still better of now than if we had not bought the gap as the fully comp payout would not have bought what she has now last July!
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Well i've just phoned the dealership and cancelled it. There was absolutely no problem, so presumably there isn't a big commission on it! Thanks for everyones advice; i'll probably get an online policy now; found one for £100!
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Its not that theres not much money in it because there is. The reason you could cancel is you are entitled to a 14 day cooling off period, covered by the FSA regulations.
The dealer would generally earn 40-50% per deal.
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