Finance Gap Insurance is designed specifically to cover any shortfall between your vehicle value and the outstanding settlement on a hire purchase or lease, following your insurance company deeming the vehicle a ‘total loss’. This method of financial protection was the first type of ‘GAP’ to be developed, initially just for lease agreements.
As with the evolution of many products, the next generation of Gap protection has become more detailed and sophisticated. Return to Invoice Gap is now a firm favorite with motor dealers, as it is simple to understand and can suit both cash and finance buyers. Vehicle Replacement is the ‘new kid on the clock’ in many ways, but can be considered the most comprehensive level of cover available today.
So where does this leave Finance Gap Insurance?
Finance Gap Insurance may now be less favored by car buyers, however it still has a relevant role in certain circumstances. The main one of these is with a lease agreement, especially where you do not have an option to buy the vehicle. Take Contract Hire for example, where a simple monthly rental is paid and the vehicle remains the property of the leasing company throughout. If the vehicle is written off during the lease period, then you will still have a lease settlement to pay, and this will include the outstanding lease payments. A Finance GAP policy can help protect that shortfall.
With hire purchase style agreements then the scope for finance gap protection may be far less, but there are still occasions when it may be the most appropriate level of cover to you. For example, if you only have a small deposit, or small amount of equity in a part exchange vehicle, then this means you may well borrow a high proportion of the purchase price of the vehicle. In this circumstance you are far more likely to have a finance shortfall, and therefore a Finance Gap policy may well be the best route for you.
Finance Gap right for you?
Remember Finance Gap cannot protect any deposit or equity you put down on an agreement, but if this figure is small anyway then a finance gap insurance policy may be the best choice to make.