So what is Finance Gap Insurance, and what circumstances may a finance gap insurance policy help you. Many vehicles are purchased using a form of loan linked to the vehicle, are you aware of what may be around the corner?
What is Finance Gap Insurance, how does it work?
Finance gap is the oldest and some say still the best form of gap insurance. It is very flexible and easy to understand. Let us show you how it can help protect you and your vehicle.
But before you can understand any form of finance gap insurance you need to accept two basic facts.
- No matter what type of vehicle you have bought (unless it is a very rare classic) it will lose value over time. The car , van, motor home or motorbike you have just bought will not be worth the same amount in two three or four years time. This loss in value you will often hear called depreciation. Depreciation is a hard cold fact of life , no-one likes it but it happens.
The average vehicle can according to the motoring experts lose up to 50 % in the first three years of its life time alone.
- The second fact is that your own motor insurance company will only pay you your vehicles valuation on the day it was written off. When you take into account the vehicle depreciation this value can be thousands and thousands of pounds less than you originally paid.
Let me show you how depreciation can affect you and how finance gap insurance can help protect you.
- Lets say that you have just bought a Volkswagen Golf. Very nice , reliable car, not normally known for losing excessive value, so its a safe bet isn’t it? You choose a 1.2 Si 105 S 5 door and pay £16,995.
- Like most of us today you did not have a spare nearly £17,000 in the bank so your part exchanged your old car and put a £500 deposit into the deal.
- This means that you financed the balance of £15,000. To keep the payments manageable you took a loan for five years.
Everything is going well with your Golf as you would expect until one day you return to the car park to find a space where your pride and joy used to be. So
- Unfortunately your car is not recovered and is written off by your insurance company who pay you the valuation of your Golf on the day it was stolen. According to What cars Depreciation calculator this could be in the region of £8,683.
- Your finance company while being very helpful still need to be paid and send you a settlement letter of £11,700.
This means that you now have no car, no deposit and still owe the finance company £3017.
You have two options you can either use what savings you have or re-finance the balance…….unless you have a Finance Gap Insurance policy.
I am sure you will agree that this is not an ideal situation to be in. Through no fault of your own you have lost a fantastic car and now have to find three thousand pounds from somewhere to clear the outstanding finance. However, you may have a finance gap insurance policy.
In this example your finance gap insurance policy would pay the difference between your Golf’s valuation on the day it was written off and clear the outstanding finance.
This would mean that you would now have no financial liability to your old car and would be free to buy another vehicle. Some Finance Gap Insurance policies also cover you for Contract Hire Gap Insurance.
With on-line finance gap insurance from from as little as £34 and the average cost of a five year policy just £100 can you really afford not to protect yourself?
Finance Gap Insurance as simple as it should be!