Featured within the Which? Report on Gap Insurance.
Protected by the Financial Services Compensation Scheme.
Buying a car using a Personal Contract Purchase (PCP) is currently one of the most popular ways of buying a car in the UK. This type of motor finance is often heavily promoted by motor manufacturers and dealerships.
Amongst the key advantages, you have the flexibility of swapping the car earlier than expected, or if you would like to keep the vehicle you can simply pay the final option to own figure.
PCP Finance is similar to a Hire Purchase agreement in that you do not own the vehicle until you make the final payment, but you do retain termination and repossession rights.
The key difference between PCP and Hire Purchase is that PCP's tend to be over a shorter term, with a deferred final payment. This can allow for shorter buying cycles, and keep you in a relatively new vehicle should you choose to swap in at the end.
You will see from the meanings of the different names above, the most common theme is choice. Because you have the choice of swapping the vehicle in slightly early or paying the final balloon payment and keeping the car, manufacturers play on the fact that it is flexible and you have the ability to select, choose or 'elect' a different option that suits you.
Therefore, no matter what the agreement is called, as long you pay a monthly payment and at the end have the legal option to own the vehicle by paying a final lump sum, this will be what we call a Personal Contract Purchase (PCP).
The consideration for a GAP Insurance product with PCP Finance is really no different than it would be with hire purchase, other finance agreements, or if you owned the vehicle outright. Over time the vehicle loses value. If the vehicle is then 'written off' following a theft, fire, accident, or flood then you are left with a few financial issues:
Your Gap Insurance claim would still be handled in the exact same way and is no different to a normal hire purchase agreement, for example.
Your own insurance company will write to you and offer you a settlement figure, which is based on the current value of your vehicle at that time.
Depending on which type of Gap Insurance you have purchased, your GAP policy would then take you from your motor insurance settlement figure back up to either:
If you are considering a Total Loss Combined Return to Invoice & Vehicle Replacement Gap Insurance, please remember that we combine all three types into one all-inclusive comprehensive policy and pay you, whichever figure is the highest.
Your policy is fully FCA regulated and backed by the Financial Services Compensation Scheme.
We are here to help! Search our help centre for any questions you may have.