The Consequences of NOT Having Click4Gap Gap Insurance
Gap insurance is a financial safety net designed to work in conjunction with your traditional car insurance. Consider it as your backup when fate deals an unfavourable hand to your cherished car. Whether your car is fresh out of the showroom or a second-hand gem, and falls prey to theft or a damaging accident leading to it being written off, Gap insurance protects you from any potential financial loss.
Contrary to popular belief, your standard car insurance policy might not have you fully covered in situations like theft or a write-off. Yes, there are scenarios where it suffices, making Gap insurance seem redundant. However, considering the swift depreciation of new cars, there are many instances where your standard car insurance will fall short.
The fact is, new cars experience a value depreciation of approximately one-third the moment they exit the dealership. This value dip grows to about 40% after the first year and hits a staggering 60% after three years. If the unfortunate occurs – theft, irreparable damage, or write-off – your car insurance company will generally offer a ‘maximum’ or ‘total loss’ pay out. This amount corresponds to your car’s depreciated value at the time of the claim, which could be significantly lower than its original purchase price. To fill this financial void and replace your car with a brand new one, you’ll have to shell out the difference from your own pocket. That’s where Gap insurance proves its worth.
But what happens if you choose NOT to take out Gap insurance for your car? Here are the pitfalls and issues you may face for each different type of car purchase.
Related Reading: 10 Fastest Depreciating Cars In The UK 2023: Top Models To Avoid
Is Gap Insurance Worth it for a New Car?
Gap insurance can be especially valuable when you purchase a new car due to the rapid depreciation that new vehicles experience.
New cars can lose as much as a third of their value within the first year of ownership. If your car is written off or stolen within this period, the pay out from a standard car insurance policy (which usually covers the current market value of the car) may not be enough to cover what you owe on your car loan or lease, or what you paid outright.
If you finance your new car with a low down payment or with a long-term loan (say 60 months or more), you may owe more on your loan than the car is worth for quite a while. Gap insurance can protect you in this scenario.
Consider your ability to pay off your car loan and purchase a new car if your current vehicle is deemed a write off or stolen. If this would be a significant financial burden, Gap insurance provides valuable peace of mind.
If you want to replace your new car with a brand-new model of the same kind, the insurance pay out based on the car’s depreciated value might not be enough. Gap insurance can help cover this ‘gap’ too.
Gap insurance is typically not very expensive, but costs can vary. You should compare the cost of the insurance to the potential benefit to help make your decision. In many cases, Gap insurance is a wise investment for new car buyers.
Please contact Click4Gap if you have any queries regarding Gap protection for your new car. Call us any time Monday to Friday, 9am to 5pm on 0208 819 3424, or Email us and we’ll get back to you during office hours.
Related Reading: Car Buying vs Leasing: Pros & Cons To Help You Decide
Is Gap Insurance Worth it for a Leased Car?
Gap insurance can be particularly valuable for leased cars. When you lease a car, you’re typically making monthly payments and may not have a large amount of equity in the car. So it makes sense to cover what you ‘owe’.
When you lease, you’re paying for the vehicle’s depreciation plus interest and fees. If your car is total loss following an accident or stolen early in the lease term, you might owe significantly more than the car’s actual cash value.
Some lease agreements automatically include Gap coverage in the contract, while others do not. It’s crucial to review your contract thoroughly to understand what is covered. If your lease doesn’t include Gap coverage, it might be a good idea to add it.
If your leased car is an insurance write off or stolen and you don’t have Gap insurance, you could be left with substantial out-of-pocket expenses to cover the difference between what you owe on your lease and the car’s actual cash value.
In general, Gap insurance is often considered worth it for leased cars, especially because many leased vehicles are brand new and depreciate faster than used cars. However, everyone’s situation is different.
Please contact Click4Gap if you have any queries about the Gap protection you may or may not need on your leased vehicle. Call us any time Monday to Friday, 9am to 5pm on 0208 819 3424, or Email us and we’ll get back to you during office hours.
Related Reading: Negative Equity on Car Finance: What It Means to You
Is Gap Insurance Worth it for a Car on PCP?
Taking out Gap insurance on a car on PCP can be particularly useful and like any new or used car purchase, the car you’re leasing with a PCP deal will depreciate over time. If the car is stolen or written off during your lease term, the insurer will pay out what the car was worth at that time, not what you originally paid or what you still owe under your PCP agreement. Gap insurance can cover the difference.
Because the car’s depreciation might outpace your payments, particularly in the early part of the PCP agreement, you may end up in a situation where you owe more than the car is worth (negative equity). Gap insurance can cover this too.
If the car is written off or stolen, the pay out from your car insurer plus the Gap insurance can help you settle the outstanding finance and avoid continuing payments on a car you no longer possess. PCP agreements often involve relatively low monthly payments and a larger final payment. If the car is written off or stolen before you make that final payment, you could owe a lot more than the car is worth.
Given the financial implications if something does happen to your car, Gap insurance can provide peace of mind, so you don’t have to worry about covering the ‘gap’ between your car’s market value and the remaining PCP balance. However, whether or not it is worth it for you personally will depend on your individual circumstances, such as your financial situation, the terms of your PCP deal, the type of car you have, and its rate of depreciation.
Please contact Click4Gap if you have any queries about getting Gap insurance for your car on PCP. Call us any time Monday to Friday, 9am to 5pm on 0208 819 3424, or Email us and we’ll get back to you during office hours.
Related Reading: What Are The Requirements For Gap Insurance?
Is Gap Insurance Worth it for a Second Hand Car?
Deciding whether Gap insurance is worth it for a second-hand car is largely dependent on your specific situation. As Gap insurance covers the “gap” between what you owe on your car and what the car is worth if it’s written off or stolen, when purchasing a second-hand car it really depends on what it is worth as it depreciates on you.
Consider, if you’re taking out a substantial loan to pay for the second-hand car, Gap insurance might be worthwhile. This is particularly true if your loan amount is greater than the value of the car due to interest or additional fees. Remember, cars depreciate over time, and the rate of depreciation might be faster than the rate you’re paying off your loan.
The rate of depreciation on a second-hand car is slower than that of a new car. However, some used cars, especially high-end or luxury models, can still depreciate quickly. If you’re purchasing a relatively new second-hand car or a model known for high depreciation, you may want to consider Gap insurance.
Also, if you’re spreading your loan payments over many years, the chances of finding yourself “upside down” on your loan (owing more than the car’s value) is greater. Gap insurance can provide protection in this situation too.
Think about your personal financial situation. If it would be a significant financial burden to pay off your car loan and purchase a new car if your current car is a total insurance loss through accident or stolen, Gap insurance can be a helpful safety net.
Keep in mind that if you owe less on the car than it’s worth, or if you own the car outright, Gap insurance is not necessary.
Feel free to contact Click4Gap to understand the best options for your particular situation. Call us any time Monday to Friday, 9am to 5pm on 0208 819 3424, or Email us and we’ll get back to you during office hours.
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Is Gap Insurance Worth it for a Used Car?
Cars, especially new ones, depreciate rapidly in their first few years. By the time a car is used, the rate of depreciation slows down. If you’re buying a used car that’s only a few years old, Gap insurance may still be worth considering, especially if you’re financing a significant amount.
If you have a long-term loan (say 5-7 years), or you made a small down payment, you may owe more on your car than what it’s worth for quite some time. Gap insurance could be beneficial in this case.
If your financial situation means that it would be difficult for you to come up with the money to pay off your car loan and buy a new car if something happens to your car, Gap insurance may be a good safety net.
Gap insurance isn’t typically very expensive, but costs can vary. You should compare the cost of the insurance to the potential benefit to help make your decision. Especially if you bought a high-end used car, Gap insurance makes more sense. Luxury cars and certain models tend to depreciate faster than others.
Remember that Gap insurance isn’t necessary if you own your car outright or if you owe less on your car than it’s worth. If you’re uncertain, get in touch and we can assist you with your query. Call us any time Monday to Friday, 9am to 5pm on 0208 819 3424, or Email us and we’ll get back to you during office hours.
In summary, Gap insurance, aptly named, fills the ‘gap’ between your insurance pay out and the original cost of your stolen or written off vehicle. This ensures you’re not at a financial disadvantage when the worst happens.
There are car insurance policies that shield buyers with the promise of a new replacement vehicle during the first or even second year of ownership if their vehicle gets stolen or written off. In such cases, Gap insurance may not be necessary. However, numerous situations render Gap insurance beneficial. So, if you’ve ever questioned, ‘Is Gap insurance worth it?’, continue reading for more enlightening answers.
Related Reading: Understanding GAP Insurance For Cars?
Is Gap Insurance Worth It FAQs
Q1: What exactly is Gap insurance and why should I consider it?
Gap insurance is an optional car insurance coverage that helps pay off your car loan if your car is written off or stolen and you owe more than the car’s depreciated value. This insurance is particularly worth considering when you have a new car or are leasing one.
Q2: Is Gap insurance necessary for every car owner?
Not all car owners need Gap insurance. It is most beneficial for those with a lease or loan, particularly if you’ve made a small down payment, the car’s depreciation rate is high, or you have a long-term loan.
Q3: What factors determine if Gap insurance is worth it for me?
Key determining factors include your car’s depreciation rate, the amount you owe on your car loan, your car’s age, and your financial situation. If your car’s value rapidly decreases but you have a substantial loan, Gap insurance might be worth it.
Q4: When does Gap insurance pay off?
Gap insurance pays off when your car is an insurance total loss or stolen, and you owe more on your loan or lease than the car’s current depreciated value. In such cases, Gap insurance will cover the ‘gap’ between what you owe and the car’s value.
Q5: How is Gap insurance different from standard car insurance?
Unlike standard car insurance, which often only covers your car’s current market value, Gap insurance covers the difference between your vehicle’s depreciated value and the remaining amount on your car loan or lease.
Q6: Can Gap insurance save me money in the long run?
Yes, Gap insurance can potentially save you money. If your car is written off or stolen and you owe more on your loan than the car’s depreciated value, Gap insurance can prevent you from having to pay out of pocket.
Q7: What’s the procedure to claim Gap insurance?
To claim Gap insurance, you need to first file a claim with your standard car insurance company. After they pay the depreciated value of the car, you can then file a claim with your Gap insurance provider to cover the remaining loan amount.
Q8: Where can I purchase Gap insurance?
Gap insurance can be purchased from your car insurer, the car dealership, or a standalone Gap insurance provider like Click4Gap gap insurance. Ensure to compare prices and policies to get the best deal.
Q9: How does Gap insurance work with a leased car?
If you’re leasing a car, Gap insurance can be extremely beneficial. If your leased car is stolen or written off, Gap insurance would cover the difference between what you’ve paid so far and what you still owe on the lease.
Q10: Is Gap insurance worth the extra cost?
Gap insurance is worth the extra cost if you have a high loan amount or your vehicle depreciates quickly. It provides financial protection and peace of mind, especially in the early years of car ownership or lease.
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Need Gap Insurance?
There are a few different types of policy you can choose from when taking out your Gap Insurance cover with Click4Gap. These depend largely on how you intend to fund the purchase of your vehicle. So what car Gap Insurance is right for you?
If you paid cash for your vehicle, or paid a sizeable deposit, or if you financed it, Combined RTI Gap cover will pay out the shortfall between the cost of your vehicle and the market value at the point of claim, which is the amount your motor insurer will cover. This is cover that will protect you no matter if you use your vehicle for private use or for business.
If you leased your vehicle or it is under a contract hire agreement, Lease/Contract Hire Gap Insurance will cover you for the shortfall on your lease agreement, after your motor insurer settlement. If, for any reason, you change your vehicle within the first 90 days from the start date, we will also arrange to transfer your cover to your new vehicle without hassle or charge.