Gap insurance on a used car, worth it?

[route101]

Bought a car recently and the car came with 'free' 30 day gap insurance cover. The insurance company phoned and asked if I'm interested in further cover for two years. Is there any point in this on top of my fully comp car insurance?

 

[simonw]

Depends how risk adverse you are and the depreciation profile of the car you bought. assuming you bought rather than financed it when it becomes slightly more worthwhile, maybe

Bought a car recently and the car came with 'free' 30 day gap insurance cover. The insurance company phoned and asked if I'm interested in further cover for two years. Is there any point in this on top of my fully comp car insurance?

 

[route101]

Depends how risk adverse you are and the depreciation profile of the car you bought. assuming you bought rather than financed it when it becomes slightly more worthwhile, maybe

I bought it rather than finance.

 

[Kite159]

And also how much the car cost in the first place.

 

[JohnMcL7]

The last couple of cars I've bought outright from garages they've pushed the gap cover quite heavily but I haven't taken it, I've never had a car written off and even if it one of them had been I'd just be looking to get a similar car to one I had which normal insurance would provide.

It's different for cars bought on finance as in the worst case it's possible the insurance payout for the car is significantly lower than the settlement value for the car due to steep depreciation which leaves the purchaser owing the finance company several thousand pounds to make up the difference. This is where gap insurance is very useful as it would cover this shortfall but that's a very different case to an outright purchase.

 

[route101]

And also how much the car cost in the first place.

About £13k with a trade in.

 

[Towers]

I must say I'm slightly baffled at the purpose of gap insurance on a vehicle which is owned outright. In the event of the car being written off your insurer should put you back into a similar/identical replacement. What exactly is the insurance covering in this instance?

 

[Bletchleyite]

I must say I'm slightly baffled at the purpose of gap insurance on a vehicle which is owned outright. In the event of the car being written off your insurer should put you back into a similar/identical replacement. What exactly is the insurance covering in this instance?

No, your insurer doesn't do that if a car is written off. It pays a reasonable* market value for the car in that situation. What you do with those funds is up to you (it may indeed not be possible to find the same car again if it was rare, say).

The purpose of gap insurance in this case is to allow a personal loan for the vehicle to be paid off if the vehicle is written off. I can't see any point if the vehicle was paid for in cash as it's impossible to quantify what the gap actually is! (The gap in question is that between the value of the vehicle paid out when written off and the outstanding finance, and is mostly really applicable to newer cars where depreciation is initially much steeper than the loan reducing as it is paid off).

Without any finance, I don't entirely understand what gap you'd be covering!

* Often somewhat deflated; it's worth to-ing and fro-ing a bit to negotiate a better figure.

 

[The exile]

Just been in the same position. The salesman made it clear (without actually saying so, of course!) that in his opinion it was a waste of money unless you’re paying a “nearly new” price

 

[Bletchleyite]

Just been in the same position. The salesman made it clear (without actually saying so, of course!) that in his opinion it was a waste of money unless you’re paying a “nearly new” price

If you take a shortish (say 3 year) loan on a car 3+ years old it probably is fairly pointless. In my experience the car's value in that case tends to fairly closely follow the curve of the loan balance. It might be worth it on a 5 year or longer loan, and is probably more worth it on finance (which must be settled if written off) than on a personal loan (which you can still keep paying monthly until settled even if the vehicle no longer exists).

 

[The exile]

If you take a shortish (say 3 year) loan on a car 3+ years old it probably is fairly pointless. In my experience the car's value in that case tends to fairly closely follow the curve of the loan balance. It might be worth it on a 5 year or longer loan, and is probably more worth it on finance (which must be settled if written off) than on a personal loan (which you can still keep paying monthly until settled even if the vehicle no longer exists).

Should have made it clear, bought outright with no need for a loan.

 

[Bletchleyite]

Should have made it clear, bought outright with no need for a loan.

I'm not sure what gap you'd be insuring, then, as there's nothing to calculate it from if there is no form of finance. Though of course given that insurance is essentially just gambling, I'm sure there are insurers out there who will insure a risk like "a flat £2K if your car is written off" or "a car equivalent to what you originally bought if you write it off during the first three years" or other such betterment, though whether the premium would be attractive is questionable.

 

[alxndr]

Just been in the same position. The salesman made it clear (without actually saying so, of course!) that in his opinion it was a waste of money unless you’re paying a “nearly new” price

On the other hand I've had unscrupulous salesmen trying to pressure me into gap insurance when buying outright, although I think at that point he was frustrated that I wasn't taking out finance and pointed out that I'd prefer to spend 5 minutes sat in the carpark arranging tax and insurance than pay the admin fee they'd tried to sneak in for them to arrange it.

I don't see the point either on a car brought outright.

 

[DelW]

AIUI, the idea of taking out gap insurance on a new car bought outright, is that if it's written off within the period of the insurance, the additional payout from the gap insurance will enable you to buy a new rather than used replacement. Otherwise it may be hard to find a like for like replacement, as not many used cars are available at say three or six months old, and any that are may be e.g. ex hire fleet rather than from a careful owner-driver.

That obviously would be less of an issue if the first car is previously used.

 

[Bletchleyite]

AIUI, the idea of taking out gap insurance on a new car bought outright, is that if it's written off within the period of the insurance, the additional payout from the gap insurance will enable you to buy a new rather than used replacement. Otherwise it may be hard to find a like for like replacement, as not many used cars are available at say three or six months old, and any that are may be e.g. ex hire fleet rather than from a careful owner-driver.

That obviously would be less of an issue if the first car is previously used.

Yes, I can see the point when there's heavy depreciation to start with.

 

[JohnMcL7]

AIUI, the idea of taking out gap insurance on a new car bought outright, is that if it's written off within the period of the insurance, the additional payout from the gap insurance will enable you to buy a new rather than used replacement. Otherwise it may be hard to find a like for like replacement, as not many used cars are available at say three or six months old, and any that are may be e.g. ex hire fleet rather than from a careful owner-driver.

That obviously would be less of an issue if the first car is previously used.

I don't know how widespread the coverage is there are standard insurance policies that will do this already up to a year, I have a standard policy with Directline and if I had a car less than a year old that was stolen or written off they would replace it with a new car the same make and model. You do have to be the first registered keeper so it wouldn't cover a nearly new car but a standard payout would likely cover a similar nearly new car since it's lost a chunk of money over a new one. I became aware of this on car forums on seeing a number of people having new cars written off and receiving a new one from the insurer.

 

[Flying Snail]

As always with Insurance, reading the entire policy really is necessary as you are just buying a piece of paper, any benefit of it being entirely dependent on the clauses contained within it.

TBH selling gap insurance to cash buyers sounds like where next PPI style mis-selling scandal is going to come from.