Decisions

[Chris Dance]

My Prius T Spirit is will be 3 years old at the end of the month. I bought the car new and purchased Gap insurance and a 3 year service plan. This month I needed to make a decision whether I should continue with the Gap Insurance and the service plan. I decided to ditch the gap insurance but get another 3 year service plan. The new service plan cost £647 paid by direct debit over the 3 years. This plan will cover all the servicing the car will require in the next 3 years, it also provides for reduced cost of MOTs and repair parts. I considered that a reasonable deal.

I have never used a gap insurance on any car I have purchased. I would be pleased to hear other members views on Gap insurance and Toyota dealer service plans.

My car is booked in for service at the end of the month. For a 3 year service, MOT, Recall, Hybrid and 12V Battery checks. The service and reduced MOT cost will be covered by my existing service plan. I am informed the Hybrid Battery check is no charge.

[FROSTYBALLS]

We've had GAP insurance on our new cars since 2001 (eight cars). Always sourced the GAP insurance myself as the dealers have a high mark up on their GAP insurance - for example

the four year policy with www.ala.co.uk on my current Auris was around £170.

One ex-member of the Rav4 forum used Ala, had his car stolen and the GAP insurance claim was settled quickly without problem.

Some car insurance companies provide a new car if yours is extensively damaged or stolen within one or two years from first registration - some GAP insurance companies allow one to defer their GAP insurance to partly take account of this. Also some GAP insurance companies allow you to transfer any balance of GAP insurance to a nother car, if you change your car part way through the policy.

OK, I've never had to claim on my GAP insurance so far, but, when you consider the cost of non-dealer GAP insurance as a percentage of the purchase price of your car, it can be quite cheap, and provides some extra financial protection should the worst occur.

I've got a service plan on my current Auris, and referenced the Toyota Fixed Price Servicing scheme to negotiate costs.

[johalareewi]

When I bought my gen3, I told the dealer that I wasn't interested in GAP insurance (they wanted way too much) and wasn't 100% sure about the 'extra shiny finish' option (too expensive). Just before I signed on the line, the dealer's finance guy came over and said they could do the 'shiny finish' for half price and throw in the gap insurance. I guess they have quotas to meet!

[Mike169]

My personal opinion, insurance companies make big profits and the chances are you won't make a claim regardless of what type of insurance it is. GAP insurance, unless you have money you can easily write off then don't bother. I TOTALLY agree with normal car insurance for a multitude of reasons but all the extra ones, just ways of getting money from your bank account, PPI being the biggest con, wheel insurance, there are many firms that can refurb. your own if you damage one and it is an issue to you, and GAP insurance, if you are unlucky enough to of needed it without taking it out then you are the exception rather than the rule and i feel it's like giving money away for nothing.

True life story, on my household insurance my shed and fence caught light on bonfire night, a rogue rocket from somewhere, my neighbour lost his shed too, 999, the fire brigade the full works, yes the insurance paid out, £900 in my case, then they just upped my premium and their letter actually stated it was because i had made a claim and they had to recoup their loss until the figures balanced again so i just cancelled it. It would of been no dearer in the long run for me to buy a replacement shed and fence panels.

[kithmo]

Most normal comprehensive car insurance policies will replace your car with a new one if written off, if it's less than a year old, so GAP insurance is a waste of money for the first year.

[Chris Dance]

The Gap Ins on my car recently expired because the car was 3 years old. The Ins Co requested I extend it for another year. I am not renewing it. Quite a few folk think Gap Ins is not necessary on a new car for the first year but after the first year it could be a good thing!! I have mixed views but in the past salesmen have convinced me I should have it on a new car!!

[Mike169]

................was the salesman on commission to sell the insurance by any chance?

[FROSTYBALLS]

I've copied the first part of the Which? report on GAP insurance below, which provides an impartial view of what the product is and who may benefit:

Gap insuranceWhat is Gap insurance?

Most fully comprehensive car insurance policies only offer 'new car replacement' during the first 12 months of ownership. If your car is written off or stolen after this period, the insurance payout is likely to leave you out of pocket.

However, insurers will only cover the current market value of your car if your claim is successful, which is somewhere just above the trade price, but lower than the retail price (often determined using a valuation service such as CAP or the Glass's Guide).

Gap insurance covers the difference between this payout, or the market value of a car, and the amount you originally paid for it. It eliminates the risk that your car insurer won't pay out enough to pay off your finance in the event of a loss. This may be a worthwhile investment.

How Gap insurance works

There are a number of different types of Gap insurance, and it's important to choose the product suitable for your needs. But the basic premise of Gap insurance is the same.

If you bought a car worth £10,000, and wrote it off three years later, when its value had sunk to, say, about £4,000, your Gap policy would meet the £6,000 difference.

Some new cars lose as much as two-thirds of their value in three years, according to Which? Car experts. Models such as the Mini Cooper SD are top for value retention – three years after buying one, it'll still be worth 50% of its original value – whereas cars such as Fords and Vauxhalls tend to depreciate rapidly.

The economic climate is also having a big impact on the market value of cars, as current fuel prices mean that diesels and smaller cars are better at retaining their value. Bigger 'gas guzzlers' are likely to devalue quicker, as they're costlier to run.

Why you might need Gap insurance

Gap insurance could be a useful insurance to have if:

• You bought your car using finance or a personal loan, especially if the loan-to-value is high. It can help you avoid 'negative equity', whereby the level of your debt exceeds the value of your car. As finance deals are normally spread over three to four years, you could be left with a large shortfall if you have an accident or the car is stolen.
• You have a contract hire deal, where you sign up to a long-term rental package for a vehicle with a mileage allowance. If you have an accident, you could be left without a car and still owing thousands in outstanding finance.
• You're concerned about your new car depreciating in value. The quicker your car loses its value, the less you might get back from an insurance payout if you have an accident or your car is stolen.

[Bibsy]

That line from Which:

However, insurers will only cover the current market value of your car if your claim is successful, which is somewhere just above the trade price, but lower than the retail price (often determined using a valuation service such as CAP or the Glass's Guide).

implies you wouldn't get enough to purchase a replacement car. The Ombudsman, however, says that whilst you might not get enough money to pay the initial asking price, they are likely to rule in a dispute that you should get enough money to actually buy the replacement car, which must be as near as possible like for like what you lost.

http://www.financial-ombudsman.org.uk/publications/technical_notes/motor-valuation.html

Quote

In most cases, we assess the market value as the retail price which the consumer would have had to pay for a comparable vehicle at a reputable dealer, immediately before the date of the damage or theft.

This may be lower than the price at which the vehicle is advertised, as the dealer may have built in a margin for negotiation. It is likely to be higher than the price payable in a private sale or at an auction and also higher than the trade value (which is the price a dealer would pay before adding its mark-up).

We are likely to award the consumer the full retail value even if they inadvertently underestimated the value of the vehicle when filling in the proposal form or luckily bought the vehicle for less than it was worth. And we have seen exceptional cases where a vehicles value genuinely rose between the date it was bought and the date of the damage or theft.

[FROSTYBALLS]

In most cases though drivers wouldn't take a valuation as far as the Financial Ombudsman.

The line from the Which? report is effectively similar to the Ombudsman:

Which?- However, insurers will only cover the current market value of your car if your claim is successful, which is somewhere just above the trade price, but lower than the retail price (often determined using a valuation service such as CAP or the Glass's Guide).

Ombudsman - In most cases, we assess the market value as the retail price which the consumer would have had to pay for a comparable vehicle at a reputable dealer, immediately before the date of the damage or theft.

This may be lower than the price at which the vehicle is advertised, as the dealer may have built in a margin for negotiation. It is likely to be higher than the price payable in a private sale or at an auction and also higher than the trade value (which is the price a dealer would pay before adding its mark-up).

[Bibsy]

Ah, now I don't know how finance works. I assumed that if you replaced the car like for like, (as the Ombudsman says is going to happen, pretty much) then your finance just carries on where you were.

Is it in fact that if the car gets replaced you have to clear whatever was outstanding on the old car and start again? In which case I can see what gap insurance does. Otherwise, I can't.

[FROSTYBALLS]

Depends what type of finance you have.

HP is tied to the car - for example the car doesn't actually become yours until the final payment is made.

I would also say that a PCP is also tied to the car - again the car doesn't become yours until the final payment is made.

A Personal Loan via a bank or similar is often not tied to the car.

So, in the case of HP, the balance on the finance agreement on the damaged car would need to be cleared - you would probably get some sort of rebate on clearing the finance early though - and a new finance agreement raised on the replacement car.

In the case of a Personal Loan, this tends not to be tied to the car, so that loan agreement could continue.

If you don't have finance on the car, the advantage of GAP insurance is that you could probably afford a new or newer car as a replacement, depending on what sort of GAP insurance you have.

[PeteB]

Insurance generally is something of a minefield, that could be really simplified if one could buy a reliable crystal ball!

Let me demonstrate with some personal examples:

After 10 years of driving company cars during the 1990s (with barely a scratch), I bought my own top of the range 1.3 Yaris in 2000. I had LOADS of extras, including SatNav (very basic non map CD based system), auto, alarm, fog lights, parking sensors, protection pack and high security windows - paid £14k for it. I planned to have it for many years, but after 11 months someone T-Boned it and pushed the drivers B post 6 inches inside the car. Now because the insurance company would have been obliged to replace it if they'd written it off, they actually repaired it. It never ran straight and true again, the wheel bearings went, and a number of electrical issues arose that I strongly suspected were down to the accident. After many trips to the repairer and my dealer, I cut my losses when it was 2 years old and traded it for en ex-demo Gen 1 Prius.

Six months later, the Prius was written off by a guy going through a red light. As I wasn't the first owner, and the car was over a year old, I got 'market value'. I bought another Gen 1 Prius ex-demo from the same dealer, and ended up with an identical (but slightly younger, lower mileage) car right down to the colour, but £3k worse off. Oh yes, I kept my full discount, but my premium nearly doubled!

Now, with my 2nd Prius, I bought the Gap insurance! Sold it 9 years later with 163k on the clock!

My last 2 insurance companies stopped doing the new car replacement for first owner during first 12 months, and my broker said most companies were phasing this out.

[FROSTYBALLS]

As regards the new car replacement clause, some companies are restricting how this operates.

With our insurers (LV) the new car replacement clause now only applies if the insured is the first registered keeper. So if one's car was, for example, a pre-registered vehicle, one would not be the first registered keeper, so the new car replacement clause in the event one's car gets written off, won't apply. One would get market value.

[johalareewi]

The thing to watch with GAP insurance is which 'gap' is actually covered.

There are a few.

The gap between what your insurers pay out:-

and the outstanding finance;

and the price originally paid for the car;

and the price of a replacement car;

[FROSTYBALLS]

Extract from a post I did previously a while ago:

"Generally there are three types of GAP insurance:

Vehicle Replacement (VR) - which covers the cost of a new replacement car (only available on new cars);

Return to Invoice (RTI) - covers the difference between the insurance payout and the original purchase invoice or the outstanding settlement figure owed to your finance company (whichever is the greater, and up to the claim limit you have chosen);

Finance GAP - covers you only for the difference between the insurers payout and the amount you have left to pay on finance.

Dealers commonly charge £200 -£500 - these GAP policies tend to have no excess. Third Party brokers - eg. www.cargapinsurance.co.uk, www.click4gap.co.uk, Car Care Plan, etc - are cheaper, can provide cover for up to 4 years, but some have a £250 excess for example. Sometimes dealers will match the cost of GAP insurance as part of the car purchase deal, or occasionally include it as part of the deal (though be wary of this in case they have 'disguised' the cost somewhere).

For new cars, some insurers will replace a car if written off within a specified period, with a new one. Not all insurers now offer this. Some insurers are limiting this clause to the first registered keeper. Some brokers can defer the start of the GAP insurance to wholly or partly cater for this.

GAP insurance has been the discussed previously - some like it, and some view it as a waste of money. I have had GAP insurance on our new cars since 2001 (eight new cars), through Car Care Plan (via the Civil Service Motoring Association) and ALA, and the most I have paid for three years cover on a new car is £ 178. I view it as worthwhile as it provides extra protection, and, is relatively cheap (ie if the cost to change of the new car is £7000, £178 is 2.54%). Others may disagree.

Before buying, check the basis of claims settlement - as regards excesses (how will these be covered (paid by you or deducted from the settlement), and how the car will be valued in the event of a loss (ie, will they rely on your insurers figures, or will they value the car themselves)."