Cars represent an unusual big ticket investment, thanks largely to their depreciating nature. In fact, the average new vehicle depreciates by around 11% once it has left a dealership lot, while most cars will have lost around 20% of their value within a year.
This is why gap insurance has become so popular, as it essentially fills the growing void that exists when your car begins to depreciate at a rapid rate. In simple terms, it covers the difference between the actual cash value of your car and the balance that is still owed through a financing agreement, creating a suitable safety net for buyers and significant peace of mind.
But what are the core financial benefits of gap insurance? Let’s take a look:
- It Provides Protection in the Worst Case Scenario
Make no mistake; gap insurance has been designed primarily to protect you financially in the worst-case scenario as a motorist.
If you’ve taken out a Ford warranty and your vehicle is totalled in an accident, for example, you’ll benefit from full coverage that safeguards your initial investment. So, even if you still owe a hefty unpaid loan amount, you’ll receive a cash payout that helps you to settle any outstanding debt.
This is a simple but extremely effective proposition, and one that should appeal to any motorist regardless of the type of car that they buy.
- It Can Cover a Huge Financial Gap
On a similar note, gap insurance can also cover a huge financial chasm relating to the purchase of both new and used cars.
In some instances, Gap policies can protect you up to the value of £100,000, and it is to be recommended if you make a minimal down-payment of less than 20%. Similarly, if you finance your car loan beyond 60 months, gap insurance can provide significant coverage that proves absolutely pivotal.
The scope and flexibility of gap insurance is is genuinely beneficial to motorists, particularly when dealing with used cars that have already depreciated considerably in value.
- Gap Insurance can be Paid in a Number of Different Ways
The cost of gap insurance premiums and payments will vary, but it’s important to note that you can also repay these in a number of different ways.
It can be added either at the dealership or directly through an insurance firm, for example, while it’s also possible to incorporate repayments into your financing. This way, you can spread the cost over the terms of your existing loan, while simplifying the process of managing your long-term debt.
This will incur interest repayments, of course, but the important thing is that have various options when looking to take out gap insurance and repay your debt over time.
