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I couldn’t handle the payments and the car was repossessed last week. It will be sold at an auction. I am sure it will be sold for a price way under what I still owe on the loan. I have GAP insurance on the vehicle. Will GAP cover the difference I owe?

If you have bought a car in the last few years you will have heard the term ‘gap insurance’. The chances are that when you bought your car the dealer would have tried to sell you gap insurance, and the chances are that you were put off by the price they quoted. Potential gap insurance buyers should take two things into account before making their decision however.

Firstly, you don’t have to buy gap insurance from the dealer when you buy the car, you can get it much cheaper online. Secondly, it is a common mistake to ignore gap insurance altogether but it is a big mistake to do so. Allow me to explain why.

Gap insurance is so called because it refers to the ‘gap’ between what an insurance company will pay out in the case of a car being written off and the amount you owe on a car. The overwhelming majority of insurance companies will only pay out the current market value of the car in the case of a total loss which, if you have had the car for two years for example, will be considerably less than you paid for it. If you have taken out gap insurance you will receive a lump sum of the difference between what the collision insurance company pays out and what you still owe on the car.

Imagine a scenario where you have bought a car on finance or with a personal loan for 15,000 paying 300 a month and 1 year in you have an accident and the car is written off. You contact the insurance company and they say they will pay you back the market value of the car, which is now only 11,000. You have made a year’s worth of payments totalling 3,600 and still owe 12,400 on the car. If you have taken out gap insurance you will receive the 1400 difference between what you have received from your collision insurance company and what you still owe on the car. If you have not taken gap insurance out it will leave you having to find an extra 1400 from your own pocket to pay your finance company or bank.

For this reason, whenever I am asked ‘should I buy gap insurance?‘ the reply would definitely be that yes, it most definitely is. I would also advise that you search for good deals online as you may not necessarily be given the best price by your car dealer. It could possibly be the best decision you ever made.

If you want to find out more about gap insurance and find great deals online, then visit the ALA website at www.ala.co.uk

I was involved in an accident in which the insurance company deemed my car a total loss. I still owed captial one auto finance about 6,000 on it and I didn’t have gap insurance. I elected to buy the car back from the insurance company for 0, but now I’m worried about Capital one trying to repossess the car, even though it’s wrecked now. Will captial one reposess a vehicle which has been deemed a total loss? Will I get a salvage title from the insurance company automatically, or who do I need to contact to get that?

My son had GAP insurance on his new vehicle. Now he can’t continue the payment and may have his vehicle repossessed.
There will be a big difference between what he still owe on his loan and the resale price of the vehicle. Will GAP pay for this difference?