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GAP Insurance for PCP Finance

 

Buying a car on Personal Contract Purchase (PCP) has become one of the most popular finance options in the UK. It offers low monthly payments and flexibility at the end of the agreement, but it also comes with risks if your car is written off or stolen.

 

That’s where GAP Insurance comes in. At Total Loss GAP, we can help protect you from financial shortfalls and the risk of losing your deposit and having to clear your finance.


What is PCP Finance?

 

A PCP (Personal Contract Purchase) agreement is a type of car finance where you:
  • Pay an upfront deposit (cash, part exchange, or dealer contribution).

  • Make fixed monthly payments for 2 to 4 years.

  • Choose from three options at the end:

    1. Trade in your car and use any equity as a deposit on your next vehicle.

    2. Keep the car by paying the Guaranteed Future Value (GFV), also called the “balloon payment.”

    3. Hand the car back and walk away.

 

This flexibility is why manufacturers give their PCP products names such as “Select”, “Agility” or “Options”.

 

See: Top 5 Benefits of PCP Finance


Why GAP Insurance Matters with PCP

 

With a PCP, you don’t own the car until you make the final balloon payment. In the meantime, the car is losing value through depreciation. If your vehicle is stolen or written off, you could face:

  • A finance shortfall: Your insurer pays the market value, which may be less than what you still owe on finance.

  • A lost deposit: Any deposit or part exchange value you paid at the start may not be recovered.

  • A 'gap' to replace the car: Insurance only pays the current market value, not the cost to replace your car with a like-for-like model.

 

GAP Insurance is designed to fill these gaps. How? It depends on which type of GAP Insurance you have, but it could be covering the difference between your insurer’s payout and the higher of:

  • Your outstanding finance settlement.

  • The original invoice price you paid.

  • The cost of replacing your car with the same age and mileage it was when you bought it.


Example: PCP Finance and GAP Insurance

 

In this example, we consider buying a brand new car with, and without, GAP Insurance and show you what may happen if the car is stolen, or written off, and declared a total loss by your motor insurer. In this case we use the following assumptions: 

1. The car you first purchase in 2025 is brand new. 

2. The GAP Insurance taken is our most comprehensive 3-in-1 Vehicle Replacement GAP

3. The cost of the equivalent brand new car, at the time of the claim, is now £22,000

 

  Without GAP Insurance With GAP Insurance
New Car price (2025) £20,000 £20,000
Deposit £5,000 £5,000
Monthly payments (36 x £295)
Guaranteed Future Value (GFV) £7,000 £7,000
After 2 years Car stolen, insurer pays £10,000 GAP tops up to £22,000 (cost of new car)
Outstanding finance £11,000 Cleared
Money left towards a new car £-1,000 £11,000

 

To summarise the outcome here:

 

Without GAP Insurance, the motor insurer's settlement, when the vehicle is stolen, is not enough to clear the outstanding finance settlement of £11,000. This means you would have to pay the shortfall of £1,000 to clear the finance settlement and have no money to put towards a replacement car

 

With GAP Insurance, the motor insurer's settlement alone is not enough to clear the finance settlement. However, the GAP Insurance settlement can top up the motor insurer's settlement (£10,000) by a further £12,000 to the cost of the equivalent, replacement brand new vehicle at the time of the claim (this has increased to £22,000). With the £22,000 available, £11,000 can be used to clear the outstanding finance. This leaves a further £11,000 to put towards a replacement vehicle. 

 

With Total Loss GAP, you’d walk away with your finance settled and enough left over to start again in a new car.

 


Manufacturer PCP Product Names

 

Different carmakers brand their PCP finance agreements under different names:

  • Volkswagen - Solutions PCP

  • Toyota - PCP Finance (formerly Access)

  • Citroën - Personal Contract Purchase (formerly Elect 3)

  • BMW - BMW Select

  • Mercedes-Benz - Agility

  • Ford - Options

  • Nissan - Preferences

  • Vauxhall - PCP Finance (formerly Flexible)

  • Renault - PCP through Mobilize Financial Services (formerly Selections)

 

No matter what name it’s given, if it’s a PCP agreement, GAP Insurance can help protect you.


FAQs: GAP Insurance and PCP Finance

 

Does GAP Insurance cover the balloon payment on PCP?
Yes. If your car is written off before the end of your PCP term, GAP can cover the finance shortfall, which may include the balloon payment.

 

What if I hand my car back at the end of PCP?
If you return the car in good condition at the end of the agreement, GAP Insurance is not needed. GAP only applies if the car is written off during the term.

 

Can I get GAP Insurance if I pay a large deposit?
Yes. Even if you put down a big deposit, you risk losing it if your car is written off. GAP can help protect your upfront payment.

 

What if I settle my PCP early?
If you pay off your PCP finance early, you should let us know. Your GAP Insurance may still protect you for the rest of the cover period, depending on the policy type.

 


Protect Your PCP Car Finance Today

A PCP agreement gives you flexibility, but only if your car stays on the road. A GAP Insurance policy from Total Loss GAP ensures that if the worst happens, you won’t be left out of pocket.

Get a GAP Insurance quote today.


For more information about GAP Insurance, please go to our GAP Insurance Guides and Information section for the most comprehensive cover in the UK. 


This page was reviewed and updated by Mark Griffiths on 5/9/2025