This Is How Much You Can Lose Without GAP Insurance
It’s quite remarkable that only one in ten people take out GAP insurance cover when they buy a new car. Especially when you consider that, on average, 384,000 vehicles are written off every year in the UK. That means around 380,000 people do not recover the full value of their car. Some car owners will lose thousands of pounds. With GAP insurance, however, you recover the full value of your car. For more information about how the GAP insurance cover works, we offer at Bettersafe, read this article.
How Do Cars Lose Value?
It’s well-established that cars depreciate as soon as you drive them off the forecourt. According to the AA, the average deprecation of a car is deemed to be around 20% a year. However, they also acknowledge that the rate of depreciation largely depends on the age of the car. For example, a brand new car may only depreciate by 10% in the first year. A second-hand car could lose as much as 40% of its value in the first year you buy it. This means second-hand cars depreciate quicker. The same is true for expensive cars. This also means that drivers who are not covered by GAP insurance lose more money. Let’s take a look at an example.
How Does GAP Insurance Work?
You buy a brand new Volkswagen Golf for £24,000 and take out a finance loan to pay for it. The loan has a 2.4% interest meaning you have to pay a total of £28,608 for your car. As soon as you drive away in your new car it’s worth £21,600. Each month you pay £280 on your loan. After owning the car for two years you have an unfortunate accident, and the car is written off. You have paid a total of £6,720 off your £28,608. After two years, your car is valued at £19,200. However, you still owe the finance company £21,888. Without GAP insurance, you are £2,688 out of pocket - and you don’t have a car. With GAP insurance, your policy would cover you for the total cost of the price you paid for the car - in our example, £24,000.
What Does GAP Insurance Cover?
Unlike a normal car insurance policy, a GAP insurance policy only comes into effect if your car is written off or deemed ‘unrecoverable’. This means if you have a small accident, and the damage is easily repaired your GAP policy won’t come into effect. However, if your car is stolen, written off, or you in some way suffer a total loss, a GAP policy will mean you won’t be left out of pocket. Then you can activate the GAP policy. Other conditions that are required to trigger your GAP insurance policy are:
- Your car is less than 8 years old.
- The car was purchased for less than £80,000.
Bettersafe also covers customers for second-hand cars that are less than 8 years old and purchased from a dealership. You can read more about GAP insurance for second-hand cars here. Don’t risk losing money if your car is written off. Buy GAP insurance today.