All car owners are legally required to have some sort of car insurance unless their vehicle is registered with a Statutory Off-Road Notification (SORN). Although a comprehensive motor insurance policy will provide the maximum possible insurance protection from a legal perspective, it isn’t necessarily enough to support you financially if your car is written off. For this reason, car owners in the know are often keen to buy an additional cover known as Guaranteed Asset Protection (GAP) insurance.
GAP insurance is designed to protect you from what could be a large financial loss if your car is declared a write-off by your comprehensive motor insurer after it is stolen or irreparably damaged after an accident, fire or storm.
We’ve written before about the benefits of having a GAP insurance policy for a new or used car, but what about a pre-registered, or pre-reg, car?
Pre-registered cars are a grey area between new and used cars. In all likelihood, a pre-registered car will not have been driven more than a few miles but its value will drop by around 30% by virtue of the brand-new car being registered to the dealer who then passes that saving onto their customer. This might seem counter-intuitive – why would the dealer want to lose out on thousands in this way? The upside for the dealer is that it helps them to hit targets and get target-related bonuses. The upside for the customer is that they pay much less for what is essentially a brand new car except on paper they’re the second owner rather than the first.
In this guide, we look at the types of GAP insurance policies available for pre-reg vehicles and discuss whether this kind of cover is worth its cost for such vehicles.
Back to Invoice bridges the gap between the original invoice price of your pre-registered car and the amount your motor insurer offers as a financial settlement for a total loss claim. It’s a great option if your primary concern is not losing money on your original purchase.
Suppose your car is stolen or irreparably damaged in an accident, but the settlement figure offered by your comprehensive insurer wouldn’t cover the cost of replacing it with a like-for-like pre-registered vehicle due to manufacturer price increases. In this case, Vehicle Replacement Plus GAP insurance will cover the additional difference.
This means that you are covered for the cost of another pre-registered car, even if it was more than you originally paid. For these ‘nearly new’ cars, the replacement cost will be based on a car of the same age and mileage as the one you originally took delivery of (as well as make, model and specification).
If your contract hire or leased vehicle is stolen or involved in an accident and written off, this Contract Hire will cover up to 100% of the outstanding rental payments. For added peace of mind, this policy will also cover any shortfall in the market value settlement provided by the motor insurer. This works in the same way for pre-registered vehicles as new cars because the age of the vehicle is not used in the policy calculation.
You can start building your GAP insurance quote here.
A Vehicle Replacement Plus GAP policy would be beneficial for a pre-registered car because it allows you to replace your vehicle with a like-for-like pre-registered vehicle in the event yours is declared a total loss. This type of GAP insurance is worthwhile if you are concerned about the possibility of higher vehicle prices in the future.
Although the cost of a GAP policy can vary based on factors such as the price of the insured vehicle and the term and level of cover, many people find that they can get this kind of insurance for around £20 per month over 10 months, or for less than £200 for a one-off payment (based on a 3-year policy).
GAP insurance is helpful if you’ve taken out a personal contract purchase (PCP) or car lease and the agreement is terminated following a vehicle write-off. The amount you owe on your lease, contract hire or PCP might be more than the settlement you receive from your motor insurer, so GAP insurance will make up that shortfall.
You can find out more about the benefits of GAP insurance on our insights page.
This isn’t strictly a limitation, but something you should bear in mind. GAP insurance is not a legal requirement and will not always be necessary. Like all insurance, you hope never to need it, but it can be an excellent investment if you do.
For all that GAP insurance has to offer, it won’t cover everything. Things like service plans and delivery fees are not included, nor will it pay for damage or expenses beyond the car’s actual value.
It also doesn’t cover your car if it was written off while an unauthorised driver was behind the wheel (if you lend your car to a friend who is not on your insurance) or if the car is stolen due to negligence (you leave your car unattended with the keys left in the ignition). Since GAP insurance generally only covers up to the vehicle’s original value, any additional money needed for excesses or other costs will have to come out of your pocket.
While buying a pre-reg car can be a great way to save money, depreciation rates could potentially throw a massive spanner in the works.
Pre-registered cars are classed as used or nearly new cars because they have seen a large initial drop in value as a result of the vehicle dealer registering the brand new car to themselves before selling on to a customer. We know that the value of new cars will drop by thousands of pounds as soon as they’re driven away. Some of this drop in value is mitigated with pre-registered cars so, what happens if your pre-reg car gets written off or stolen soon after you buy it?
In reality, it’s no different to any other vehicle being written off; albeit, the loss won’t be as huge as with a car where you’re the first owner. Your insurance company would only pay out the current market value, and you’ll lose out on the difference between the insurance pay-out and what you paid for the car. This is where GAP insurance can help by covering the shortfall.
It’s always wise to compare your options and get a quote from a professional before you decide to take on a policy or not.
Get in touch with our GAP insurance experts today and talk to one of our friendly representatives about our GAP insurance plans for pre-registered vehicles. We’ll help you find the kind of coverage that works for you at a price you can afford.
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