Imagine you have your perfect little car and you achieved it on finance. It’s winter, the dark nights and treacherous icy roads have caused you to have an unfortunate accident. These things do happen and your car is written off. Due to the fact your car has been purchased on finance does not mean that your outstanding balance does not longer apply, unfortunately your finance or contract hire company actually have the legal right to demand the full remaining amount from you within 28 days. This leaves you in an extremely terrifying position, as more than likely, your motor insurer will only return funds equal to the amount your car is worth on the day it is written off/stolen. This tends to be a lot less than when you bought it due to depreciation rates.
What can Finance and Contract Hire Gap Insurance do for you?
Many people actually don’t realise this fact and this is where Finance and contract hire Gap insurance can help you. Similarly if you have a Contract hire vehicle and are involved in an accident or are the victim of theft, the remaining amounts are owed to the leasers. Finance and contract hire Gap insurance, along with your motor insurer will pay the outstanding balance to the finance company or leaser, leaving your mind stress free with regards to a financial catastrophe.
Finance and Contract Hire Gap Insurance example:
If you purchased a Fiat Punto through finance and the value of the car was £12,100, then according to whatcar.com’s depreciation calculator, then after three years, your car may only be worth £4,700, meaning it has depreciated by £7,400, a significant amount. If you were involved in an accident in which your car was written off, or it was stolen, then your finance or contract hire company would still expect the outstanding payments owed to them, to be paid. Your motor insurance will only award you with the valuation of your vehicle on the day of total loss and so you could find yourself with thousands of pounds owing to your finance or contract hire company. Finance and contract hire company will literally pay the difference between the amount that is paid to your finance or contract hire company and the outstanding payments that you owe, so that you are standing in the same position as you where before you acquired the vehicle. Do not leave yourself open to a financially devastating situation.
Remember, that if you can never own your vehicle then Contract Hire Gap Insurance is the only Gap Insurance for you, however if you have a hire purchase on Finance then there may be other options you can explore, if ownership of the vehicle will eventually be to you.