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PCP Gap Insurance | Total Loss

How does Gap Insurance work with a Personal Contract Purchase (PCP)?


Buying a car using a Personal Contract Purchase (PCP) is similar to purchasing a vehicle on a form of hire purchase. The only real difference is that instead of financing the whole amount, you are financing part of the vehicle with an optional payment to own the vehicle at the end. It is currently one of the most popular ways of buying a car in the UK. The reason being, you have the flexibility of swapping the car for another, earlier than expected, or if you would like to keep the vehicle, you can pay the final option to own figure.


With it being one of the most popular ways of buying a vehicle in the UK, we want you to know exactly how Gap Insurance can work for you, in the event of a total loss. If the above arrangement sounds familiar but the term PCP doesn't, please remember that this form of finance arrangement is called a different thing depending on which manufacturer you go with.

List of Manufacturers PCP Names

Total Loss Gap Insurance for PCP

  1. Volkswagen - PCP Solutions
  2. Toyota - Access
  3. Citroen - Elect 3
  4. BMW - Select
  5. Mercedes Benz - Agility
  6. Ford - Options
  7. Nissan - Preferences
  8. Vauxhall - Flexible
  9. Renault - Selections

You will see from 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).


How does Gap Insurance work with a PCP?


Your Gap Insurance claim would still be handled in the exact same way and is no different to your 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:


  • The amount outstanding on finance (Finance & Contract Hire Gap)
  • The original invoice price you have paid for the vehicle (Combined Return to Invoice)
  • The cost to replace the vehicle with another 'like for like' (Combined Vehicle Replacement)


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.


For Example, let's say the highest figure is the cost to replace the vehicle with another 'like for like' model, which is now £20,000. After three years of depreciation, your motor insurance has given you a figure of £10,000. Therefore, we have taken you from the £10,000 back up to the £20,000.


However, because the vehicle is on a form of PCP agreement, we always have to clear the amount outstanding on finance within any settlement. We then contact the PCP company and ask them for the outstanding settlement figure at that moment in time. This would be made up of the final balloon payment and any remaining monthly instalements left on the agreement. Let's say this figure is £12,000. £10,000 balloon payment and £2,000 is 8 months of payments. This £12,000 is then cleared and the difference back up to the £20,000, the £8,000, is yours to do with as you wish.


The only difference in how the Gap Insurance performs with a PCP is that the amount outstanding on finance always has to be cleared and the funds left over, the balance, deposit and all of the equity you have in the vehicle, comes back to you. Please remember, the above description is based on how a Combined Gap policy works with Total Loss Gap and if you have purchased a form of Gap Insurance elsewhere, it may perform slightly differently. 


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