Protecting a deposit with gap insurance?
Discussion
Are there any gap insurance style products for covering your deposit? If I get a car on finance, gap will cover the shortfall between insurance payout and finance, but if I say put down a 10 grand deposit then the finance amount is not the full amount and I’m short my deposit right? I don’t think a return to invoice policy would work either because with apr, the total finance is likely higher than the cost of the car.
So as far as I can see the best I can do in this environment is that it’ll put me in a position where I can walk away from the finance without owing anything but I’ll be short any deposit I put into the car. Am I missing something? Are there any protections I could take to cover me for both the finance figure and my deposit amount? Thanks in advance.
So as far as I can see the best I can do in this environment is that it’ll put me in a position where I can walk away from the finance without owing anything but I’ll be short any deposit I put into the car. Am I missing something? Are there any protections I could take to cover me for both the finance figure and my deposit amount? Thanks in advance.
Somebody here had opened topic that they had their car written off (or what if) while parked - would they get back deposits.
Most answers were “you are wrong; you get payout full price” but I am not sure it was clear in contract.
Can you send some emails to companies to ask? You can have documented and sleep better.
Most answers were “you are wrong; you get payout full price” but I am not sure it was clear in contract.
Can you send some emails to companies to ask? You can have documented and sleep better.
When I bought a new car, there were two main gap policies I found. Return to invoice (which pays out the difference between the insurance payout and the invoice price) and Return to Vehicle (which tops up the insurance payout to get you in an equivalent vehicle). I don't believe they differentiate how the vehicle is paid for.
Also looks like there is a specific finance one too:
https://www.nerdwallet.com/uk/gap-insurance/main-t...
Chris
Also looks like there is a specific finance one too:
https://www.nerdwallet.com/uk/gap-insurance/main-t...
Chris
I’ve just googled the first pcp I can find to help illustrate my question. Numbers rounded for simplicity:
Price £31k
Deposit £4.5k
Credit £26k
Total loan (8.9% over 4yrs) £38k
If I understand - if someone went with a return to invoice they’d get the difference between insurance payout and £31k to bring back to invoice - but you’d still be on the hook for the outstanding finance + your deposit for the next car.
If you got a finance specific one you’d get the difference between insurance payout and whatever remained of the £38k to settle the finance - but as the deposit is not part of the finance amount - whilst you’d be able to walk away from the finance - you’d still be out of pocket £4.5k from the deposit.
I don’t see any scenario which covered you for the deposit AND the finance unless I’m missing something. So whilst a bigger deposit helps with equity in the car and lower loan payments, you have a bigger risk on the GAP side. Is there something obvious I’m missing?
Price £31k
Deposit £4.5k
Credit £26k
Total loan (8.9% over 4yrs) £38k
If I understand - if someone went with a return to invoice they’d get the difference between insurance payout and £31k to bring back to invoice - but you’d still be on the hook for the outstanding finance + your deposit for the next car.
If you got a finance specific one you’d get the difference between insurance payout and whatever remained of the £38k to settle the finance - but as the deposit is not part of the finance amount - whilst you’d be able to walk away from the finance - you’d still be out of pocket £4.5k from the deposit.
I don’t see any scenario which covered you for the deposit AND the finance unless I’m missing something. So whilst a bigger deposit helps with equity in the car and lower loan payments, you have a bigger risk on the GAP side. Is there something obvious I’m missing?
Once you have got the car the deposit becomes academic as you have then " paid " £31k in total.
RTI Gap cover then returns you any difference between the Insurance payout and what the car invoice was for.
If say the Insurance paid out £30k then you get £1k from Gap.
If the car was written off and you got the full £31k from either Insurance or the Gap difference , then the Finance is made whole and you get your "deposit" back which by then is equity not a deposit anyway.
RTI Gap cover then returns you any difference between the Insurance payout and what the car invoice was for.
If say the Insurance paid out £30k then you get £1k from Gap.
If the car was written off and you got the full £31k from either Insurance or the Gap difference , then the Finance is made whole and you get your "deposit" back which by then is equity not a deposit anyway.
alscar said:
Once you have got the car the deposit becomes academic as you have then " paid " £31k in total.
RTI Gap cover then returns you any difference between the Insurance payout and what the car invoice was for.
If say the Insurance paid out £30k then you get £1k from Gap.
If the car was written off and you got the full £31k from either Insurance or the Gap difference , then the Finance is made whole and you get your "deposit" back which by then is equity not a deposit anyway.
But isn’t the finance £38k? So RTI would leave you short 7?RTI Gap cover then returns you any difference between the Insurance payout and what the car invoice was for.
If say the Insurance paid out £30k then you get £1k from Gap.
If the car was written off and you got the full £31k from either Insurance or the Gap difference , then the Finance is made whole and you get your "deposit" back which by then is equity not a deposit anyway.
The £7k from your example is interest payable but you won't be able to " insure " that part I don't think - that is just the cost of buying the car on Finance.
Iirc there was a product on the market once which effectively gave you Gap + which might have helped.
That said if you were unlucky enough to write the car off on day 1 then that interest wouldn't be payable anyway as the loan would be in effect paid off.
If you wrote the car off on after say month 24 then the value of the car would have diminished by something so the interest loss would be mitigated slightly.
Iirc there was a product on the market once which effectively gave you Gap + which might have helped.
That said if you were unlucky enough to write the car off on day 1 then that interest wouldn't be payable anyway as the loan would be in effect paid off.
If you wrote the car off on after say month 24 then the value of the car would have diminished by something so the interest loss would be mitigated slightly.
alscar said:
The £7k from your example is interest payable but you won't be able to " insure " that part I don't think - that is just the cost of buying the car on Finance.
Iirc there was a product on the market once which effectively gave you Gap + which might have helped.
That said if you were unlucky enough to write the car off on day 1 then that interest wouldn't be payable anyway as the loan would be in effect paid off.
If you wrote the car off on after say month 24 then the value of the car would have diminished by something so the interest loss would be mitigated slightly.
Thanks for the insights. If you went via PCP though isn’t the interest front loaded, so if your car was stolen in the first few months then return to invoice wouldn’t cover the interest outstanding on the loan and the settle finance GAP wouldn’t cover the deposit as it’s not in the loan amount. Iirc there was a product on the market once which effectively gave you Gap + which might have helped.
That said if you were unlucky enough to write the car off on day 1 then that interest wouldn't be payable anyway as the loan would be in effect paid off.
If you wrote the car off on after say month 24 then the value of the car would have diminished by something so the interest loss would be mitigated slightly.
Lwb552 said:
Thanks for the insights. If you went via PCP though isn’t the interest front loaded, so if your car was stolen in the first few months then return to invoice wouldn’t cover the interest outstanding on the loan and the settle finance GAP wouldn’t cover the deposit as it’s not in the loan amount.
The interest is payable monthly over ( in your example ) 48 months so if stolen in the first few months the quoted interest numbers wouldn't apply as in effect the loan is therefore paid off.Even if the loan remained in force ( ie the finance then covers you for exactly the same numbers on a replacement car ) you would still be able to pay off whatever the loan left was ( remembering the amount reduces each month ) and then leave you free to start again with whatever equity was left in the post scenario.
As such return to invoice GAP should still suffice for you -but this isn't advice as I'm no expert !
alscar said:
The interest is payable monthly over ( in your example ) 48 months so if stolen in the first few months the quoted interest numbers wouldn't apply as in effect the loan is therefore paid off.
Even if the loan remained in force ( ie the finance then covers you for exactly the same numbers on a replacement car ) you would still be able to pay off whatever the loan left was ( remembering the amount reduces each month ) and then leave you free to start again with whatever equity was left in the post scenario.
As such return to invoice GAP should still suffice for you -but this isn't advice as I'm no expert !
Ahh that makes much more sense; I thought the interest was front loaded, so you’d be on the hook for the full £38k even if you had to settle day 1, essentially wiping out the deposit-driven equity out have in the car. Thanks!Even if the loan remained in force ( ie the finance then covers you for exactly the same numbers on a replacement car ) you would still be able to pay off whatever the loan left was ( remembering the amount reduces each month ) and then leave you free to start again with whatever equity was left in the post scenario.
As such return to invoice GAP should still suffice for you -but this isn't advice as I'm no expert !
I read your other posts on the potential Cayenne purchase so presume this is what these finance figures are for.
With a warranty ( Porsche ) for 2 years plus Gap assuming you are happy with the affordability etc you are protecting yourself as much as you can.
I had a 2009 model GTS V8 which we kept for a decade but wouldn’t have run it without a warranty.
I don’t recall the 2 years service intervals as being too painful other than things like the cost the new brake fluid change which always seemed to add a lot but it does on most cars it seems.
With a warranty ( Porsche ) for 2 years plus Gap assuming you are happy with the affordability etc you are protecting yourself as much as you can.
I had a 2009 model GTS V8 which we kept for a decade but wouldn’t have run it without a warranty.
I don’t recall the 2 years service intervals as being too painful other than things like the cost the new brake fluid change which always seemed to add a lot but it does on most cars it seems.
Lwb552 said:
Ahh that makes much more sense; I thought the interest was front loaded, so you’d be on the hook for the full £38k even if you had to settle day 1, essentially wiping out the deposit-driven equity out have in the car. Thanks!
At any point in a PCP finance agreement you can request a settlement figure (often available on line) and there will normally be two figures shown - the amount outstanding and the amount needed to settle the account at that point. Early on in the agreement the difference between the two figures will be quite significant as you will be refunded all or most of the interest that you would have paid if you had carried on with the agreement to the full term.For example the figures I received for early settlement (after only two months) on a VW agreement last year were:
Amount outstanding: £13,695
Settlement figure: £12,490
It also stated 'Interest saving': £1,205
So if there was a total loss of your car, part of the payout would be used to settle your agreement with the finance company (as per above) and the remainder plus any GAP payout is yours.
ScoobyChris said:
When I bought a new car, there were two main gap policies I found. Return to invoice (which pays out the difference between the insurance payout and the invoice price) and Return to Vehicle (which tops up the insurance payout to get you in an equivalent vehicle). I don't believe they differentiate how the vehicle is paid for.
The second one is also often referred to as 'New Car Replacement' policy.I actually found a third type last week and purchased a policy - its marketed as a 'Top Up' policy and what is does is, if the car is written off/total loss pays out a sum of money equivalent to an additional 25% of the main insurer payout (although limited to £10,000). This gets around the problem of 'return to invoice' where the current cost of a replacement car has gone up significantly in the meantime (as it has with me and I have only had the car a week) due to rising prices or unavailability of discount (or in my case a nasty combination of the two)!
Edited by Mark V GTD on Saturday 11th March 13:28
alscar said:
The interest is payable monthly over ( in your example ) 48 months so if stolen in the first few months the quoted interest numbers wouldn't apply as in effect the loan is therefore paid off.
Even if the loan remained in force ( ie the finance then covers you for exactly the same numbers on a replacement car ) you would still be able to pay off whatever the loan left was ( remembering the amount reduces each month ) and then leave you free to start again with whatever equity was left in the post scenario.
As such return to invoice GAP should still suffice for you -but this isn't advice as I'm no expert !
Ahh that makes much more sense; I thought the interest was front loaded, so you’d be on the hook for the full £38k even if you had to settle day 1, essentially wiping out the deposit-driven equity out have in the car. Thanks!Even if the loan remained in force ( ie the finance then covers you for exactly the same numbers on a replacement car ) you would still be able to pay off whatever the loan left was ( remembering the amount reduces each month ) and then leave you free to start again with whatever equity was left in the post scenario.
As such return to invoice GAP should still suffice for you -but this isn't advice as I'm no expert !
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