Wheres The GAP?
Let’s say that you buy a car for £10,000 on credit over five years. Thanks to interest and other charges, the total amount repayable on your loan is, say, £12,500. Now let’s fast-forward two years, when your car is written off following an accident, fire or theft. Your motor insurer then offers you a settlement to enable you to replace your car. Alas, thanks to depreciation, your motor insurer estimates that your car is worth only £5,000, so it refuses to hand over more than this. However, your loan still has three years to run and, after early settlement charges and an interest refund, will cost £7,000 to repay. Thus, you have a ‘gap’ of £2,000 between your debt (£7,000) and your motor-insurance payout (£5,000). This is when GAP insurance rides to the rescue, as it promises to pay the shortfall to the finance company in order to clear your debt. Thus, you’re no longer out of pocket and everyone’s happy, right? Alas, it’s never that easy. The problem is that motorists find GAP insuranc
