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How important is GAP insurance for your new car lease?

Almost two in five drivers have been hit by another vehicle within a year of ownership, according to research by fleet management and vehicle protection technology specialists AX, writes Chris Lilly from Kew Vehicle Leasing.

With so many incidents involving new models, we take a look at the importance of GAP insurance. Should your new leasing model be one of the unlucky 39%, GAP insurance could make sure you’re not losing out.

‘Non-fault’ accidents

AX has gathered data from more than 68,000 accidents involving a guilty third party. Of these, 39% of motorists were hit by another driver within a year of having their car.

In the same circumstances, more than one in 10 drivers are hit after having their car for fewer than 90 days. AX says that drivers are 50% more likely to be hit in the second month of owning a new car than in the 12th.

What is GAP insurance?

Guaranteed Asset Protection (GAP) insurance looks to cover costs linked to a car’s depreciation (its loss of value from new).

While not having to worry about car depreciation is one of the benefits of taking a new car lease from Kew Vehicle Leasing, new leasing customers could find themselves with a shortfall if their car is written off. This is because a car depreciates as soon as the keys are handed over.

Should an accident mean the car you’ve leased is declared a total loss, you are still bound by the leasing contract to pay for the car.

Conventional car insurance covers a proportion of these costs. However, payments are made to the value of the car just before the accident.

As such, leasing customers could be left out of pocket. With the car’s depreciation meaning only a proportion of the original value is paid, the customer is left to cover the shortfall – or gap

Why get GAP insurance?

A typical car will lose around 50-60% of its initial value after three years, and up to 40% in the first year. This depends on make and model, but is a good ball-park figure.

It means that after an incident a year into your lease, you could only receive £15,000 for a car that was worth £25,000 when new. You would then be liable to cover the additional costs for the remainder of the lease. GAP insurance will cover this shortfall, potentially saving you thousands.

Depending on the policy, it could also cover the excess on your car insurance and contribute towards a replacement lease model.

Is GAP insurance for everyone?

There are certain limitations for GAP insurance, including the size and value of vehicle. Cover isn’t possible for cars over seven years old either

The car must have a conventional motor insurance policy, and be a standard (non-modified) model

If the conditions are met, GAP insurance could make a lot of sense for leasing customers. With traditional car purchase, there’s less importance for GAP insurance. A driver may be out of pocket, but they don’t owe anyone anything.

With leasing, the contract still stands, even if the car is stolen or written off. As such, GAP insurance is more likely to be worthwhile. As with all insurance, you need to look at the costs and weigh up the benefits.

How do I take out GAP insurance?

At Kew Vehicle Leasing we do not offer GAP insurance directly, but we can refer you to our specialist partner provider. If you would like to understand more about GAP insurance, talk to one of our leasing experts here on 0203 189 1299

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Posted on 3rd October 2019 at 7:55 PM

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