Sorry if there is a thread somewhere else, I tried to search for GAP and it wouldn't let me as its too short.
Does anyone know what the difference is between what the dealer trys to sell you at the dealership and places like
www.ala.co.uk and
www.click4gap.co.uk apart from the price which is a nearly a third less?
Any help would be great.
Guys (and Gals?) I work for an online GAP Insurance provider. No doubt the forum rules prevent me from revealing who, so I'm not going to do so.
Nevertheless, I've been alerted to this conversation and having read through all of the posts, there is clearly some confusion about what GAP Insurance is and how it works.
I wanted to take the opportunity to try to clarify matters and hope it will be taken in the good nature that it's intended.
There are now four types of GAP Insurance available in the UK. How they differ is dependant on which "Gap" the policy is intended to cover:
- Finance GAP Insurance - Covering the difference between the motor insurance payout and the amount outstanding on finance at the time of loss.
- Retail Value GAP Insurance - Covering the difference between the motor insurance payout and what was the Retail Value (according to a guide such as Glass' Guide or Parkers - depending on the supplier) of the vehicle when you bought the Retail Value GAP Insurance policy.
- Invoice GAP Insurance - Covering the difference between the motor insurance payout and the original price the vehicle was purchased for.
- Replacement GAP Insurance - Covering the difference between the motor insurance payout and the cost of replacing the vehicle new-for-old at the time of loss.
Other than via motor dealers, "Finance GAP Insurance" is now rarely sold.
Consider... the potential risk to a "Finance Buyer" is almost always decreasing... after all, each month a repayment is made towards the finance agreement and the amount outstanding reduces... this means that the goal posts are constantly moving (shrinking) and (generally) the more time that goes by without a claim, the more will have been paid off the finance, therefore the smaller the potential GAP Insurance payout will be.
In summary, Finance GAP Insurance is a decreasing level of cover.
On the flip side, Invoice GAP Insurance, effectively fixes the original purchase price as the start point... the more time that goes by without a claim, the more the vehicle will have depreciated, therefore the larger the potential gap would be.
In summary, Invoice GAP Insurance is an increasing level of cover.
This being the case, a cash buyer is almost always at a greater potential of financial loss than a finance buyer and subsequently is usually far better suited to buying GAP Insurance. Further, with few exceptions (see below) a finance buyer is usually better suited to purchasing Invoice or Replacement GAP Insurance than Finance Gap Insurance, on the basis that an Invoice or Replacement GAP Insurance policy would usually leave them with money left over, after having settled the remaining finance (if applicable), to put towards the cost of replacing the vehicle - as opposed to Finance GAP Insurance which at best would leave them at zero... (e.g. no car, but no debt either)
The only time that a Finance Buyer would be better suited to buying GAP Insurance than a cash buyer, is if no or little deposit was put down and/or the interest rate of the finance agreement was particularly high, in which case the finance agreement settlement figure in the early part of the loan could well be higher than the original purchase price of the vehicle.
However, to counter this, you'll now find that many companies offer a combined Invoice + Finance GAP Insurance policy which, in the event of a Total Loss, will pay the difference between the motor insurance payout and the GREATER of either, the finance agreement settlement figure OR the original vehicle purchase price - giving the best of both cover types in one policy.
Specifically in answer to the OP's question the difference between the policies supplied by motor dealers and those supplied by the various online companies usually come down to:
Motor dealers charge considerably more because they can. But, most people in their position would do the same. Unfortunately most people still don't know what GAP Insurance is and usually the first time someone hears about it is from the motor dealer, who in turn will normally give the impression that it's a "right-here-right-now" kinda deal and can't be equalled by anybody else (I constantly hear stories about how motor dealers have described nightmare scenarios of other companies not paying out). Regretfully, most people still either fall for it, or simply can't be bothered to look elsewhere, or don't realise they can and therefore the motor dealer effectively has a captive market and can get away with such absurd prices. That being said, they do have much larger overheads than us online providers and are therefore
somewhat justified in charging a higher price.
I hope this helps.
I apologise for stepping on anyone's toes. I mean not to cause offence.