What is Gap Insurance
If you are shopping for your next used car, you may have seen or heard the term ‘GAP insurance’ being used or it being offered to you. Here is everything you need to know about GAP insurance, so you can work out whether or not you would like to take it out with your next used car.
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GAP insurance stands for guaranteed asset protection, and it is a type of insurance that will protect the value of your car, should anything happen. This would usually be in the case of an accident, or the car being written off for another reason.
The reason that it exists is that your insurer will only pay the current market value for your car, which means there can be a hefty gap if you took out finance for your vehicle, due to APR, interest rates, and other factors.
GAP insurance would help to bridge the gap between the market value and what you either owe on your agreement with finance GAP insurance, or what you purchased the car for with return to invoice GAP insurance. It acts as peace of mind so that in the event of something bad happening, funding a finance agreement and having no car to show for it, isn’t something you will have to worry about.
We get asked a lot whether or not GAP insurance is right for a particular customer, and the truth is, that it completely depends on your own circumstances and what you are looking for. If the car is low value then it may not be worth taking out an agreement, but if you are financing an expensive car, with APR on top of the value, then it could be worth investigating a GAP insurance agreement.
There are so many different options out there and if you are looking for that peace of mind, then a member of the team will be more than happy to discuss that with you.
GAP insurance can be an option that you add on to your finance agreement, which is taken out separately and paid separately to the agreement. It means that you have one less thing to worry about and we hope you never would have to use it, but if you did, it can stop you from losing money.
The trouble is, that when you take out finance, the APR is added onto the balance, so you will owe more than the car is worth. Now, this isn’t an issue in the real world, as it is simply how finance works, but in the event of an accident, it can mean you are short-changed and sometimes end up owing money on a car. If the car got into an accident or got written off, the finance company will still want their money back, and the finance doesn’t get wiped in the event of a write off, which is a common misconception.
GAP insurance can be a great add on, but it is important that you do your research. If you are looking for car finance and a used car in Derby, come and speak to the team at Hilton Garage and we will be able to help and advise you to find the right deal and the right type of GAP for you.