Bought a four-year-old estate, financed about 80% over five years, and the dealer pushed gap cover as an add-on at signing. My understanding is that it only pays if the car is written off and I owe more than the insurer settles at. With 20% down on an already-depreciated car I struggle to see the window where I'm underwater. Am I missing something about how fast used cars fall against a five-year loan?
The half people miss: gap generally covers the loan shortfall, not your motor excess, and typically not accessories you added afterwards. Dealer-sold gap is also usually far more expensive than the identical product from your own insurer or a standalone provider. Price it separately before you sign anything at a desk with a pen already in your hand.
The excess point matters more than it sounds. People assume gap makes them whole and then find they're still out the motor excess on a total loss.
Some policies do offer an excess top-up as a separate add-on. Worth asking about explicitly rather than assuming it's bundled in.
Had gap, used it, glad I did — but I was 5% down on a nearly new car with a long term, which is the opposite of your situation in every respect. The payout covered about €3,400 of shortfall. For a 20%-down used car I would have skipped it without much thought.
Ask specifically what valuation basis the motor insurer settles on, and whether the gap policy tops up to invoice price or to the finance balance. Those are two different products sold under one word and the sales patter blurs them.
I'd keep it if the price is genuinely small and the term is five years, purely because five years is a long time to be confident about anything. But price it away from the dealer. The figure I was quoted at a desk was several times the standalone quote for materially the same cover.
Whatever you decide, this hinges on your loan terms and your local market. Worth ten minutes with a broker who doesn't earn commission on the add-on before you commit for five years.
@rebalance_rita · 4w ago · 3 replies
Gap covers the difference between the insurer's settlement and your outstanding loan balance if the car is a total loss. With 20% down on a four-year-old car you're mostly right — the steepest part of the depreciation curve happened before you bought it, and a five-year term on a used car rarely goes underwater the way a zero-down new-car loan does. Plot the loan amortisation against a depreciation estimate for that model and see whether the two lines ever cross. If they don't, you've answered it in writing.
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@petra_lindqvist · 4w ago
It hadn't occurred to me to actually plot it. Doing that this weekend.
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@rebalance_rita · 4w ago
Also check whether you rolled negative equity from a previous car into this loan. That's the thing that quietly puts people underwater on paper that looks fine.
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