What If I Refinance My Car During the GAP Insurance Policy Term?

If you refinance your car during the GAP Insurance policy term, your cover will normally continue. GAP is tied to the car and purchase value, not the specific finance product. However, the way it applies can change depending on how you refinance.

How GAP works if you refinance · When finance shortfall may not apply · Points to check · Related links

Changed your finance deal?

Check your GAP Insurance options

If you buy your car on a PCP or HP finance agreement, then the GAP Insurance will typically cover you for the higher of:

The higher of the original invoice price you paid, or the outstanding finance settlement (Return to Invoice GAP)
The higher of the equivalent replacement cost, the original invoice price paid or the outstanding finance settlement (3-in-1 Vehicle Replacement GAP from Total Loss GAP).

The finance element is included because with hire purchase (HP) or Personal Contract Purchase (PCP) the finance is tied to, and against, the vehicle. In other words, you have to pay the finance off if the car is written off or stolen.

If you get a bank or personal loan to pay off the HP or PCP mid-agreement, then the finance element is not tied to the vehicle. It is tied to you. This means if the vehicle is stolen or written off during the period of the bank loan, you may not have to pay off the finance.

So, where does that leave you with your GAP Insurance cover?

How GAP works if you refinance

GAP continues to protect the car’s invoice price or replacement cost for the rest of the policy term.
The cover is not automatically cancelled or invalidated when you refinance.
The way the finance shortfall element will no longer apply if the finance agreement is no longer tied to the vehicle.

When finance shortfall element may no longer apply

Switching to a personal loan: GAP won’t cover unsecured borrowing not linked to the vehicle.
Clearing PCP or HP: If refinancing pays off your finance, the policy will still protect invoice or replacement values, but not finance shortfall. All the settlement can be paid to you, as there is no finance tied to the car anymore.
Rolling in extra borrowing: GAP only covers the car’s value. Any borrowing above this (e.g. negative equity or unrelated debt) won’t be protected.

Points to consider

Tell your GAP provider if you refinance so that they can advise you accordingly.
Remember, if you have rolled further debt into your refinancing, then this will not be covered under any GAP claim.
If you plan to keep the car longer after refinancing, remember your GAP Insurance is not normally extendable.

Tip: Refinancing doesn’t cancel GAP, but the type of protection that applies can be altered. The invoice or replacement cost can still remain covered, and it is like becoming a 'cash' buyer of the vehicle.