Should You Buy Lease GAP Insurance?
Leasing a hire car allows you to drive a brand-new car at favourable terms. However, if your car is written off or stolen and you don’t have lease GAP insurance, you could be left out of pocket.
Lease GAP insurance is an optional coverage you can purchase when you hire a lease car. But is it worth the extra expense on top of the standard comprehensive coverage or collision insurance?
In earlier articles, we have detailed everything you need to know about GAP insurance so we won’t go over that same information again here.
However, to give a brief outline, GAP insurance essentially bridges the ‘GAP’ between how much you paid for your car and the amount the car is valued at, just before it was written off.
Why Buy Lease GAP Coverage?
When you lease a car from a hire firm, insurance companies insist that you are covered by comprehensive coverage or collision coverage.
Either of these policies enables you to claim compensation to help you repay the lease contract for the full term.
However, under the terms of comprehensive coverage or collision insurance, the amount you are paid for a written off or stolen lease car is determined by the depreciated value of the car.
So what happens if the amount you owe on your lease hire contract is more than the depreciated value of your car?
Most cars lose between 15-35% of their value in the first year and 40-60% after three years.
That means that in most instances when a leased car is written off or stolen and you don’t have GAP insurance, you can lose a significant amount of money.
Do you need GAP Insurance?
You can buy GAP insurance as a package offered by the lease hire firm or directly from an insurance company.
However, you don’t need it if the lease hire firm offers a replacement car in the event your hire car is written off or stolen.
But here’s the catch. A replacement car typically means you will get an older car of less value. This could mean you are paying for a brand new BMW but driving around in a five-year-old Ford Focus.
Lease GAP insurance is optional, yes, but it is an inexpensive solution that ensures you are not left out of pocket or overpaying for a car you hate driving.