Quote Originally Posted by elisiX View Post
I haven't heard of GAP insurance for years. I remember when I bought one of my first cars that it was suggested to me. As a private buyer, I always go with NRMA who replace my vehicle new for old in the first 2 years. From that point, I select an agreed value (which is generally in line or above the outstanding loan amount/value of the car). So in this situation I dont think its necessary - however I can certainly see the merit on a leased vehicle or for those using an insurer who do not replace new for old early on in the cars life.
This is the common misconception that the insurance company will pay out your loan as well as your car. Why would they pay you more than they have to? Ever heard of that happening?

Cars depreciate one way while banks recoup much of their interest component or charges up front. That is what creates the GAP. There is NO comprehensive cover that will payout your loan (including new for old because that concerns just the car) on the market. That is why we have GAP insurance. Quite often the comp won't cover many of the options you buy. Ie internal DVD players etc Particularly for 2nd hand cars. I passed on that website because I'd rather people buy through there as oppossed to not buying at all.

As I said I am a car finance broker and 9.5 out of 10 of my clients buy this cover. I always tell them that they don't have to buy it, but when I explain what it does they insist on having it. The other .5 either still don't understand what it does or are frugal which is fair enough. peter@myamb.com
POMI