Russell Scanlan Minds the GAP
Managing Director, Bryan Banbury, discusses the benefits of purchasing Guaranteed Asset Protection (GAP) insurance through a specialist broker, rather than directly from a car dealership.
- Car buyers are in danger of paying over the odds for GAP insurance if their car is stolen or damaged, due to high premiums quoted by car dealerships.
In September 2015, the Financial Conduct Authority (FCA) introduced new legislation designed to change the face of GAP insurance for consumers and create a more competitive market for insurance providers.
GAP covers the difference between what your insurer pays out and what was originally paid for the car, if your vehicle is stolen or damaged. The new rules have made it fairer for car buyers by creating a two-week ‘cooling-off’ period - in theory, allowing buyers 14 days to research the market, compare deals and seek out the best possible offers instead of buying expensive insurance from the car dealer on the spot.
But how much difference has this new legislation made – are buyers actually taking advantage of this relatively new freedom to shop around?
The stark fact is that if you buy a brand-new car, its value drops by 30 per cent as soon as you drive away from the dealership. If the same new car is damaged or stolen, your insurer will pay out what it was worth at the time of the incident, which is likely to be thousands less than what you paid when you bought it. GAP cover insures the car for this depreciation in cost – particularly useful for new vehicles - and as 70 per cent of all new cars in this country are bought on finance, the need for gap insurance is greater than ever.
Despite the freedom given to buyers to shop around for insurance following the FCA legislation, it is estimated that car dealerships sell around a quarter of new cars with GAP policies that usually push the £300-£400 mark (or more) – double the average price offered by specialist insurance brokers. This price hike is a result of high rates of added commission and is helping to boost the general insurance add-on market to an estimated £1bn per year.
It could be the convenience of package deals or simply pushy sales people which are holding buyers back from getting the cheapest payment opportunities - but two years on, it is clear that people still need to learn about the rules which enable them to find more cost-efficient options.
Even despite a double-digit rise in IPT last year (taking it to 10%, soon to be 12%) brokers like Russell Scanlan can offer GAP protection for as little as £150 including administration costs – a drastic differential from the average policy purchased through a car dealership.
Our advice: shop around. Brokers like Russell Scanlan offer expert advice on the best levels of cover to suit you and offer a personalised service that matches your specific needs – without leaving you out of pocket.
For more information, contact a member of our dedicated private client team on: 0115 9838837.