GAP Insurance Explained — Is It Worth It?

If your car is written off, your insurer pays market value — which may be thousands less than you paid or still owe on finance. GAP insurance covers that gap.

GAP insurance is one of the most misunderstood products in the automotive world. Here's a clear-headed look at when it makes sense and when it doesn't.

Why the 'Gap' Exists

The moment you drive a new car off the forecourt, it typically loses 15–25% of its value. By the end of year three, most cars have lost 50–60% of their purchase price. If your insurer writes it off at that point, they'll pay current market value — which could be far less than the finance outstanding or what you originally paid.

What GAP Insurance Pays

Depending on the policy type:

Finance GAP — covers the difference between the insurance payout and the outstanding finance balance

Return to Invoice GAP — pays the difference between the insurance payout and the original purchase price

Vehicle Replacement GAP — pays the difference between the insurance payout and the cost of an equivalent replacement today

Is It Worth Buying?

GAP insurance makes the most sense when:

You have a large finance balance relative to the car's current value

You bought a vehicle known for high depreciation

You put down a small deposit (less than 20%)

You're early in a PCP or HP agreement

It makes less sense when:

You paid cash and the car has held its value well

You're near the end of a finance agreement

Where to Buy It

Avoid buying GAP insurance at the dealership — it's almost always overpriced. Independent providers typically charge £100–£200 for equivalent cover that dealers charge £300–£500 for.

Whatever happens to your vehicle, Fred's Towing Services gets it recovered safely across Newport, Cardiff, Bristol and Bath. Call 01633 982028 — 24/7.