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Are they stopping GAP insurance?
Guaranteed Asset Protection insurance (or GAP insurance as it’s usually referred to) ‘covers the gap’ if your vehicle is written-off and the payout from your insurance is less than the amount you owe on your vehicle loan or lease, leaving you paying for a car you no longer have. As an example, if a car is worth £35,000 at the time of an accident but £40,000 is still left on a loan, then GAP insurance could bridge that £5,000 gap.
It’s a useful insurance for those who might purchase a new vehicle that could depreciate quickly, or if there’s a high loan-to-value ratio, where someone owes more on a vehicle loan than the vehicle is worth. Some leasing agreements may also require GAP insurance.
What many people don’t realise is that you can still buy GAP insurance even if you purchased your car/van outright, as in the event of a write off it will give you an additional sum of money to top up what your motor insurer pays you, so it effectively gives you New for Old cover!
However, 2024 saw some changes in the GAP insurance market, when the Financial Conduct Authority (FCA) announced that some insurance firms had agreed to pause sales of GAP insurance at the FCA’s request. As a result, you’re less likely to be offered GAP insurance at a dealership when buying a vehicle, but GAP insurance is still available from insurance brokers for those who see it as a useful financial safety net.
Rising vehicle costs, leading to longer loan terms have also made GAP insurance more relevant, to help manage the increased likelihood of negative equity early in the loan term.
If you’re not sure whether GAP insurance is right for you and you’re going to be financing or leasing a vehicle soon, then have a chat with one of our friendly team. We’ll answer any questions you may have about GAP insurance, and help you calculate whether it’d be a smart move to get protected.
