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Buying A New Car & Your Dealers Gap Insurance Policy

Buying a new car from a UK Car Dealer is really exciting for all of us. The most frequent question you will find your friends and family asking is the following - What is the new cars reg or what plate is your new car on? Sound familiar? New registration plates come out twice a year in the UK and are referred to in several ways.

  • Registration numbers
  • Personalised registration numbers
  • License plate number plates
  • Private plates
That takes care of the most common. Here at Click4Gap we find our busiest times are around April and August when the British New Car Dealers are selling off last year's stocks at truly fantastic discounts. Also the number of new car sales increases dramatically as car buyer's flock to get their hands on vehicles with new registration plates. This is when you are able to buy the latest models just released by the big manufacturers. We will all have seen massive promotional pushes in the media from February till April. Manufacturers are desperately trying to sell last years models to fleet car buyers or national lease car companies to make room on their showroom floors for the newest models. This is the time of the year that finances are generally put to the test as it's the end of your tax year and many motorists are aware that new cars depreciate far quicker than they used to.

New Car Buyers "Only New Will Do!"

Many new car buyers are therefore buying/replacing their vehicles more frequently than before. The personal lease car market is growing as a result too. It is easy to see why this is, ten years ago a new car held far more of its value than a modern car will today. Mass production and consumer led demand has dictated to motorists that they should own the newest car possible and reliability and long car warranties being offered by Corporate Dealerships has meant the UK market is now flooded with cars which are still fairly new and even many 5 year old cars have very few miles on the clock. The truth is that even a five year old car with 120 000 miles on the clock is today considered to be ultra reliable due to modern production methods. Used cars abound and this drives down the value of newer cars very quickly!

Firstly, what is Gap Insurance?

Firstly, what is Gap Insurance? Well, there are three basic options. If your car is beyond repair the amount paid based on the value of the vehicle could be less than the outstanding balance on your loan. GAP Insurance should cover the difference between the Insurer's payout and the motor dealer invoice value. This insurance is intended to cover "the gap" between the two figures. The second option is the difference between what you paid for the car and the offer from the car insurers. GAP is short for Guaranteed Asset Protection. Unfortunately it can be quite common that a car dealer may try to sell its new car buyer gap insurance at an over inflated price to boost their profits, this normally happens right at the end of the deal, leaving the customer out of pocket and confused. Therefore here at we sell 4 tailor made gap insurance policies to suit your needs.

Return to Invoice Gap Insurance

- this is available to you whether you paid cash or borrowed the money from a Bank or Motor Loan or even chose Contract Hire. RTI also gives you added protection if your car is declared a "Total Loss" and it pays the difference between the your Motor Insurers settlement and the original amount you paid for your car 

Finance Gap Insurance

- this is available for a vehicle financed under a Finance Agreement other than Contract Hire, e.g. Hire Purchase, Lease Purchase, Personal contract Purchase (PCP). Finance gap insurance is available to companies and private individuals on vehicles up to eight years of age for a maximum cover period of 5 years, regardless of when you bought the vehicle. With Finance GAP you only pay for the period of cover you require. If the vehicle is a "Total Loss" during the agreement and without having any Finance Gap Insurance, it may mean that any shortfall financially is down to you at the end of that agreement, if you are not full covered within your general insurance policy. They would then pay out for the market value of your car. If the finance settlement from your finance provider is in excess of the insurer's offer you will be personally liable for the financial shortfall. Your motor insurance provider will pay out the market value of your car. 

Vehicle Replacement Gap Insurance

- basically this is the highest level of cover available from most insurance companies. It is a new for old policy. This is again available to you whether you paid cash or borrowed the money from a Bank or Motor Loan. VRI insurance gives you added protection if your car is declared a "Total Loss", it will also replace your car with a brand new one! VRI will pay to you the difference between the settlement you receive from the Comprehensive Motor Insurance Policy and the cost of a replacement new vehicle, even if the retail price has increased! 

Return to Value Gap Insurance

- this can be taken out up to 7 years after buying your car from either Private or Dealer/Broker sourced cars. It is available if you paid cash, took out any kind of loan or if you have a contract hire or leasing agreement. This will return the value of your car by paying the difference between the Motor Insurer's settlement and the value of your car today. RTV insurance also pays you the depreciation if your car is a total loss.

Have You Got Gap Cover? Are You Gap Protected?

Unfortunately many modern new cars do not hold their second hand value very well which is why even a 2002 model belonging to most of the more common cars you see on the roads today can be bought for under £5000 today; some with a price tag of just under £4000. A true reflection of the way depreciation affects new car buyers would you not say? Gap Insurance can help you protect against this depreciation should you have an accident and your insurer only offers to pay you out the book value (market value). Note that is the insurer only pays the vehicles book value as it stands at the time of the accident, not your purchase price!
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The opinions expressed are those of the author and are not necessarily held by the Click4Group unless specifically stated. The material is for general information only. Always obtain independent, professional advice for your own particular situation.
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