When you lease a car there's a few things to think about - which make and model, what your annual mileage is, how long you want your lease care for. Another consideration, and something you may not have heard of before is GAP insurance.
What is GAP insurance?
GAP stands for Guaranteed Asset Protection. This has nothing to do with the value of the vehicle.
You are insuring the difference in amount the insurance company will pay out if your new car is stolen or written off and what the finance company, which funded your new car, will expect to be paid to settle the outstanding finance. Put another way is the difference between the insurance company pay out amount and the settlement figure from the finance company.
For example, you get a new car and three days later it is stolen and never recovered. Let’s say the insurance company will pay £10,000, but the finance company say the settlement figure is £15,000. Again this is nothing to do with the value of the vehicle. So you have to pay the finance company £15,000, but your insurance will only pay out £10,000, so you would need to find the balance, that is £5,000.
So GAP insurance covers you for this eventuality. And if you find yourself in the unfortunate position of having your new car stolen or written off, the GAP insurance will cover you for the difference between what the insurance company will pay out and what the finance company expect to receive from you.
The cost of GAP insurance is typically around £200 for the term of the lease and is payable at the start of the lease. And the good news is that there is the option to pay in ten monthly instalments by direct debit, so that softens the impact a little.
Another benefit of GAP insurance is that it will also pay up to £250 of your motor insurance excess in the event of a fault claim. And just to be clear the excess is the bit you have to pay if there is a claim.
So that’s it, GAP insurance explained, but if you still have questions please contact our team.