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MoneyExpert.com - New car purchases 'require Gap insurance'

17-6-2008
Guaranteed Asset Protection (Gap) insurance is more relevant to purchases of new cars than older ones, Auto Trader magazine has reported.

New cars can lose up to 40 per cent of their value in their first year and up 60 per cent in their third, according to the AA.

Gap insurance - cover that is designed to balance out the car's original market value and what insurance companies pay out - may therefore be more useful to owners of new cars.

Tom White, spokesperson for Auto Trader, suggests shopping around for the best Gap insurance deal, but also looking at the potential benefits.

"Not all drivers should consider Gap," he said. "The newer and higher value of the vehicle, the greater the depreciation will potentially be and therefore Gap will have greater relevance."

Drivers should not expect Gap insurance to be offered on cars over seven years old, for example.

Mr White added that insurers are unlikely to lower their payouts for a write-off due to growing popularity of Gap insurance policies.

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