News and views from the automotive industry.
GAP insurance can be vital for new car finance buyers
Last year, new car sales hit a 10-year high due to growing confidence in the UK’s economic recovery. Great news for dealers! In total 2.47 million cars were registered, with sales increasing month on month.
Figures are now back to pre-recession levels as the population puts its faith in falling unemployment and economic prosperity. The large majority of sales rely on finance, according to The Finance & Leasing Association. The UK trade body for asset, consumer and motor finance sectors found that 75.9% of private new car sales were bought on finance through dealerships.
Why is GAP vital for car finance buyers?
With car finance helping to fuel the growth in car sales, the need for GAP insurance is booming. Covering the difference between a regular insurance pay-out and the replacement value of the car, GAP insurance can make sure consumers are not left out of pocket should their car be written off.
GAP insurance can be vital if consumers buy a car on finance to protect against the vehicle’s depreciation. If the car is written off after a fire, a theft or an accident, its current market value may well be less than it costs to replace it – and potentially less than the amount owed to the finance company.
For example, let’s say your customer’s new car costs £12,000, which they are repaying through instalments over a 48-month period. If they wrote the car off after a year they might only get its current market value from their insurance company and not the £12,000 they originally paid for it. Depreciation means new cars lose their value very quickly – on average, 60% over three years according to The AA.
To learn more about GAP insurance, its benefits for dealerships and consumers as well as tips and advice on boosting sales, download our FREE eBook: Complete Guide to GAP Insurance.
Why should dealers be selling GAP insurance?
With so many private new car buyers taking out finance through their dealership, dealers have a golden opportunity to tell their customers about GAP insurance and its benefits. It can be essential for those taking out a finance deal on their new vehicle and is a chance for you to grow revenue streams and boost customer retention.
The benefits of buying GAP insurance are many and being able to convey them clearly, simply and effectively to your customers is essential. Here are a few:
- Protect investment – A new car is a big expense but the investment can diminish rapidly due to depreciation. GAP insurance helps ensure customers receive the original value for the vehicle should they suffer a total loss claim – not just the market value.
- Peace of mind – Following a write-off, customers can rest assured they will be able to replace their vehicle with a new one, rather than downgrading due to depreciation reducing the payout from their motor insurer.
- Finance pay-off – Customers don’t want to get stuck paying off a finance deal for a vehicle they don’t own anymore. Choosing to pay off the finance slowly or taking on a higher interest rate can end up leaving customers with a large bill. GAP insurance can help cover the difference, meaning they can pay-off their finance deal and purchase a new car.
Car Care Plan provides an exceptionally high level of GAP insurance cover, receiving the highest 5-star rating from Defaqto, the UK’s leading independent financial services rating agency. To find out more visit www.carcareplan.co.uk or call 0344 573 8000.