GAP insurance on used cars

[Bobby Dazzler]

Except that it does in principle cover the cost of a replacement car - the confusion is that *you* and *some* others assume it should be the equivalent of a sort of 'new for old' in that it replaces your vehicle with what you originally purchased. A car is a depreciating asset. Most people understabd this - even if they don't necessarily do the calculations or know the actual value of the deporeciation on a monthly or annual basis. The insurance covers the replacement of a depreciated asset with a similar value asset.

If you dont like it - then buy GAP cover. If insurers offered the equivalent cover then one might reasonably expect the policy to be increased - the euivalent of adding GAP cover.

And "not one person would wish for it to fail to cover the cost of a replacement car" .... well if your assertion is true then presumably a 100% of used cars are bought with GAP policies. I rather suspect that this is not the case. Therefore your assertion is unproven.

(Insurance policies on new cars typically do cover the exceptional case of a writeoff of a car that is under a year old with the replacement of a new car - if you are the first owner.)

I used to think the same - that if the worst ever happened then I would be paid market value for my car by the insurance company, and I could then choose to buy an equivalent car of equivalent value, or pay more to buy something more expensive.

I thought GAP insurance was a commission generating machine, which added no real value except for those who really wanted to get back to the invoice price, which really meant insuring the car for more than it’s market value for the life of the car (beyond the first day), which again I dismissed as depreciation is part of car ownership.

That was until my car was stolen and the pay out from my instance company was well below what I could buy an equivalent car for. I’m not talking a small amount either, from memory it was around 20% below the least expensive private sale at the time, and around 25% of the least expensive main dealer sale.

The insurance company wasn’t at all interested in the examples I’d taken from the Autotrader nor the statistic analysis which I did to demonstrate that they had undervalued my car in the real world. I really couldn’t believe it, nor the fact that the insurer refused to budge.

Since then I concluded that when purchased outside of the main dealer, from a specialist broker or direct, GAP insurance is a relatively small proportion of the total cost of buying and running a car, and so for me at least it’s worth taking away the headache if the worst happens.

I’ve found that when purchased away from the main dealer GAP insurance is much less expensive, around half the price in my relatively limited experience. That said most things are more expensive from the main dealer, we pay our money and make our choice.

 

[Deleted member 159894]

I assumed nothing.

I *inferred* from your *own* statements.

But that aside however arrogant you think I am - it will be an massive underestimate of the actual level.



Which is a misunderstanding on your part.

You buy a vehicle. You insure it. The asset wears and depreciates. The standard insurance on said asset replaces the equivalent of what was worn and depreciated. That puts you back in the in the position you were pre-incident.

You are complaining because you want to be put back to the position at which you purchased the vehicle.

Where the system as such is actually unfair is where you have a lease vehicle where an 'initial rental' was paid. Or there is finance involved and the vehicle value at the time of loss is less than the outstanding finance.

What have I said that leads you to think that I expect a new car to replace my used one?

Again, I expect to be put back to where I was before my car was written off and this rarely happens Unless I have bought another policy to cover the shortfalls of my original one.

 

[Bobby Dazzler]

You are complaining because you want to be put back to the position at which you purchased the vehicle.

How do you reach that conclusion from their post? I don’t see that from what has been written.

 

[Maco]

Ive just turned it down on a new 21 plate A220D saloon, the dealer wanted £620 for 3 year. I honestly don't have a clue about GAP, turning down these options is just something that's been bred into me from my dad. Whenever he bought a new/used car he would always tell the salesmen before he even sat down with him that he wanted absolutely no extras at all so guess its been passed on. I did look into it though as this will be my first 'brand new' car. Again completely clueless, but my insurance covers me for a like for like replacement on a new car within the first 12 months if its written off. Is that completely different to GAP?

 

[Bobby Dazzler]

Ive just turned it down on a new 21 plate A220D saloon, the dealer wanted £620 for 3 year. I honestly don't have a clue about GAP, turning down these options is just something that's been bred into me from my dad. Whenever he bought a new/used car he would always tell the salesmen before he even sat down with him that he wanted absolutely no extras at all so guess its been passed on. I did look into it though as this will be my first 'brand new' car. Again completely clueless, but my insurance covers me for a like for like replacement on a new car within the first 12 months if its written off. Is that completely different to GAP?

There are different types of GAP insurance, one of which is back-to-invoice which would effectively do the same thing beyond the first 12 months, ie make up the difference between the insurance pay out and the invoice price of the car.

There’s usually a time limit on how long you can wait before taking out some GAP policies, so if you wait until your car is 12 months old then you may have fewer options. Also if the car is financed/leased then there may be specific types of GAP available.

 

[markjay]

..I expect insurance to put me back in the position that I was in pre-incident and that’s not happening any more unless I buy a top up policy.

To be precise, if you don't have GAP insurance, then the insurer will put you back in the position you were just before the incident occurred. If you do have GAP insurance, then the insurer will put you back where you were when you originally purchased the car, which can be months or years before the incident.

Now this is the bit that I always found odd about GAP insurance for second hand cars. If the car is written-off, you effectively get the depreciation back. If the car isn't written-off, then you shoulder the depreciation in full yourself (when you finally sell or scrap the car). What is the logic behind wanting to be insured against depreciation but only under certain conditions (i.e. if the car is written-off)?

On a new car bought under a (say) 3-year lease, GAP insurance makes sense, because the normal depreciation (if the car isn't written-off) is already included in the finance calculation. So the customer pays a steady monthly fee which a write-off event could throw into disarray. GAP insurance helps keeping the payments at a constant level (assuming the customer leases another car instead of tbe one written off).

But on a second hand car, GAP insurance puts the owner in profit if the car is written-off, compared to not having a claim. Which is great if you're a betting man, I guess. The longer you keep the car, the bigger the jackpot - but only if it's written-off. The thrill of the gamble?

 

[Deleted member 159894]

To be precise, if you don't have GAP insurance, then the insurer will put you back in the position you were just before the incident occurred. If you do have GAP insurance, then the insurer will put you back where you were when you originally purchased the car, which can be months or years before the incident.

Now this is the bit that I always found odd about GAP insurance for second hand cars. If the car is written-off, you effectively get the depreciation back. If the car isn't written-off, then you shoulder the depreciation in full yourself (when you finally sell or scrap the car). What is the logic behind wanting to be insured against depreciation but only under certain conditions (i.e. if the car is written-off)?

On a new car bought under a (say) 3-year lease, GAP insurance makes sense, because the normal depreciation (if the car isn't written-off) is already included in the finance calculation. So the customer pays a steady monthly fee which a write-off event could throw into disarray. GAP insurance helps keeping the payments at a constant level (assuming the customer leases another car instead of tbe one written off).

But on a second hand car, GAP insurance puts the owner in profit if the car is written-off, compared to not having a claim. Which is great if you're a betting man, I guess. The longer you keep the car, the bigger the jackpot - but only if it's written-off. The thrill of the gamble?

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