The cost-of-living crisis and car buying habits: why you should still choose GAP insurance
The ongoing cost-of-living crisis has affected every single sector of our daily lives; energy, food and fuel prices have increased drastically, making it harder for some of us to carry on with our current lifestyles. Many people have these financial worries when it comes to their car; in a 2022 study, 63% of drivers said that the cost-of-living crisis had left them worried about how they would fund their car in terms of fuel and finance payments. With this in mind, it would be easy to assume that many drivers would ignore GAP (Guaranteed Asset Protection) insurance completely. But is this wise? And, most importantly, is this true?
In this guide, we will explore how the crisis has affected our car buying habits as a nation, as well as the used car market’s significant changes. We will also discuss whether GAP insurance is worth it, especially now, and why forgoing the insurance altogether isn’t the best move…
How has the cost-of-living crisis affected car buying habits?
As a nation, we have all been affected by the ongoing cost of living crisis. For some people, running their car and their options for a new one has been affected. 67% of survey respondents admitted that the cost-of-living crisis had deterred them from getting a new car as they focused on more pressing financial commitments. 25% of people declared that they would choose a PCP loan when purchasing their next car in order to spread the cost.
It is often said that a car is one of the most expensive investments you will make; there’s the initial payment for the car itself (whether that be a cash payment or deposit), and you need to consider insurance, road tax, servicing, MOT (if over 3 years old), breakdown cover, warranties, fuel, and any issues that require the assistance of a garage. It’s no wonder people are choosing to delay buying another car; however, despite the cost-of-living crisis, used car prices have never been higher. So, if you’re thinking of selling your car, now might be the best time.
Interestingly, 54% of survey respondents say they normally look towards used cars when choosing a new car, as they are still the cheaper option on monthly payment loans than new ones. New car sales are declining for several reasons, with more people looking towards a used car. Therefore, as demand increases, so does the price.
With all of these statistics in mind, GAP insurance can be seen as another expense. However, setting aside the initial cost and the hope that you never have to use it, GAP insurance could save you thousands of pounds if your car is written off whilst you have cover.
GAP insurance and used cars: is it worth it?
GAP insurance helps you retrieve any financial losses relating to your car should it be written off or stolen. For instance, a Back to Invoice Plus policy will cover the difference between your car insurer’s settlement and the original invoice price of your vehicle or the finance settlement, whichever is higher at the time of the claim. This is a significant benefit with new cars, as they often depreciate quickly, so you won’t be out of pocket.
GAP insurance is still a great idea for used cars, even more so in today’s used car market. If you buy a used car for £9000, and the market suddenly drops over the coming years, you could be entitled to a huge pay out from your GAP insurance provider if your car is written off or stolen. So, despite the cost-of-living crisis affecting all of us, arguably GAP insurance should still be one of your top considerations when buying a new car; should the worst happen, you won’t be out of pocket.
Despite the current economic crisis deterring people from getting a new car, many drivers still understand the importance of GAP insurance. 45% of people who already have GAP insurance say that they would still take out a policy despite the ongoing cost-of-living crisis. However, 37% of people are unsure whether they would take out GAP insurance.
Many people are still unaware of GAP insurance and the many benefits it can provide, or they have been offered an overpriced product by a dealership. Understandably, these people are less likely to take out a policy but with a car written off every 90 seconds, it has never been more crucial to consider a GAP insurance policy. GAP insurance can help save you money should your car be written off or stolen. It works for vehicles bought outright or on finance from a dealership, from a private seller, or on contract hire.
GAP insurance can bridge the gap between what your car insurance provider pays out, and the original invoice price of your car. It can also pay for the replacement cost of your vehicle, the outstanding balance of a finance agreement or the remaining rental payments depending on your circumstances and the policy you take out. To discuss which policy would be the best for you, you can give us a call today.
So, should I still get GAP insurance?
If you have recently bought, financed or leased a new car, GAP insurance is a great, money-saving idea. No matter whether your car is new or used, you won’t be out of pocket if your vehicle is written off or stolen. Some people may be reluctant to purchase GAP insurance, or other kinds of insurance during a difficult economic time, but the financial effects of having your car declared a total loss can be much more damaging. By protecting your vehicle now, you can yourself time, money and stress in the future.