Should you buy gap insurance for a used car?

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Gap insurance provides an extra layer of protection on top of comprehensive car insurance. It’s designed to cover the difference between the price you paid for your car, and the amount your car insurer will pay out in the event of a claim. You can buy gap insurance for new or used cars, but depending on your circumstances, you might not need it.

Why do you need gap insurance?

Cars lose value fast. According to the AA the average car will depreciate in value by around 60% within the first three years of its life. So if you bought a car for £16,000 new then after three years it may only be worth £6,400. And of course, new cars depreciate much faster than used cars, which is why gap insurance is more commonly associated with new cars. But there are still some occasions when it’s worth considering:

You’ve bought a nearly new car

“Nearly new” and “used approved” cars may benefit from a gap insurance policy. That’s because you’ve purchased a car early in its life, when its value is still depreciating quickly. This is particularly true of higher value or specialist cars.

You’ve bought a used car on finance

If you’ve bought a car on finance then you may feel more comfortable with a gap insurance policy. Just make sure you choose a policy which covers outstanding finance.

What is Return to Value gap insurance?

There are two types of gap insurance policies available for used cars. The most common is a Return to Invoice policy which covers the difference between the amount you receive from your car insurer, and the invoice price you paid for the car when you bought it. In most cases, an RTI policy is the best option. It generally provides the best level of cover, is easy to understand and is the best value for money.

However, if you’re looking to cover an older car, or one which was purchased privately, then you might need a Return to Value (Market Value) policy. These tend to be cheaper but only cover the car up to its market value at the time you purchased the policy, not the actual price you paid. Although Return to Value offers less cover than Return to Invoice, it can still help to cover you against financial loss. A Return to Value policy is worthwhile if:

You purchased a car privately

If you didn’t buy your car from a dealer then most insurers will only offer a Return to Value policy. You might want to consider the value of your car, and how you believe it will change in the future, as a Gap policy might not be worth the money.

You’ve owned your car for some time

Depending on the age of your car and when you bought it you may find that some insurers will only offer Return to Value policies.

Can I buy a Return to Invoice policy for an older car?

Some comparison websites and insurers will allow you to purchase Return to Invoice policies for older vehicles, however we strongly recommend that you double check the policy wording before you do this. Most Return to Invoice policies will not cover vehicles over a certain age, depending on the insurer. When you compare gap insurance with InsureMyStuff4Less we’ll only show you suitable policies.

Avoid buying gap insurance from your car dealership

The commission car dealers earn from policy sales gives them an incentive to push gap insurance. Unfortunately, many of the policies they sell are overpriced or provide an inadequate level of cover. We’d recommend that you never buy gap insurance from your dealer, without getting comparison quotes online first.

There are many gap insurance providers in the UK, offering a range of different policies. You should check that you are buying from a reputable business, which is FCA authorised. You could also do some research online to check reviews and feedback from other customer before you purchase a policy.