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Car loans customers advised to shop around for Gap insurance

Drivers using car finance to purchase a new car are being advised to shop around to get the best deal on Guaranteed Asset Protection (Gap) insurance.

Drivers using car finance to purchase a new car are being advised to shop around to get the best deal on Guaranteed Asset Protection (Gap) insurance.

Auto Trader says Gap insurance, which is designed to bridge the gap between a car's original value and what the insurer pays out if it is stolen or written off, has "greater relevance" for those buying a new car.

The magazine's Tom White advises customers to shop around for the best deal and consider which type of Gap insurance they require – cover that pays off the outstanding car loan or replaces the vehicle like-for-like.

He says: "The newer and higher value of the vehicle, the greater the depreciation will potentially be and therefore Gap will have greater relevance."

The insurance option is not typically offered on cars over seven-years-old, he adds, so not all drivers should consider Gap.

According to the AA the average new car has lost around 40 per cent of its value by the end of the first year.

If a motorist drives 10,000 miles a year the average new car will have lost around 60 per cent of its value by the end of the third year.

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