As the old saying goes, every cloud has a silver lining – but equally, that means every silver lining also has a cloud. And for those enjoying the excitement of getting a brand spanking new car hot from the factory floor, that means thinking about insurance.
Insurance is far from a favourite subject for most people and for those for whom it is, you would be better off avoiding for fear of being bored to sleep. Nevertheless it is a necessary evil and one which needs a bit of research in order to get the best deal.
But is no longer just a case of getting the most cover for the cheapest cost, buying a new car also comes with the added question of whether gap insurance should be purchased.
Everyone knows that the minute the rubber on the tyres hit the tarmac of the open road, thousands are immediately wiped off the value of the car, but sadly not off the amount borrowed. This means that should an accident occur and the car is written off, there would be a shortfall in the insurance as only the market value would be paid. This is where gap insurance steps in, paying out the difference between what the insurer values the car at and the amount left outstanding on finance. Gap insurance will also plug the difference if your pride and joy is stolen.
For owners of sparkly new cars, the benefits of gap insurance are obvious, especially when you consider that it will take a considerable length of time before the amount owed on finance is less than what the insurer would cough up. The main exceptions to the rule are purchasers who have been able to provide a large deposit as the finance balance may not be more than the value of the car.
The benefits are somewhat more questionable for folks buying used cars as the amount paid for gap insurance may be more than the difference between the market value of the car and the finance balance. It is always therefore worth checking with your insurer what the payout price would be approximately, or using a trade book yourself to value the car.
Even if you opt to plump for gap insurance, taking out the cover the offered by the car salesman is often akin to throwing extra tenners down the drain. The product is complex and very few people think of it in advance, allowing garages to charge well in excess of the going rate for the cover. What many people do not realise is that it is possible to organise gap insurance after the purchase and in most cases internet providers can slash the cost in half or more, making it a much more attractive option.
The majority of the public would never take out the first offer of finance they get for larger purchases, such as buy to let mortgages, so the same principle should apply for smaller levels of borrowing. Before taking out the cover, seriously consider what advantage it would provide to you and research the market for the most comprehensive cover you can get for the fewest pounds before going ahead.