Buying a used car may still be an expensive ordeal. Due to depreciation, the price of a used car is typically less than buying a brand new car. But many drivers still break the bank and spend thousands on what could be their dream car. On the face of it, GAP insurance may seem more valuable for new cars. But is GAP insurance worth it on a used car as well?
Unlike standard motor insurance, GAP is not a legal requirement to drive on the road in the United Kingdom. However, some drivers consider used car GAP insurance because it may protect them from a financial shortfall if the car is written off or stolen and not recovered.
GAP insurance may help cover a financial shortfall. InsureWorks arranges GAP insurance quotes on a non-advised basis and is underwritten by specialist insurers. Insureworks Ltd is an appointed representative of Your Company Matters Ltd, which is authorised and regulated by the Financial Conduct Authority (FCA).
This guide will explain the impact of used car depreciation and when some drivers may consider used car GAP insurance.
Used car depreciation
A new car will lose value as soon as it rolls off the forecourt. The largest drop in value tends to happen during the first three years. Depreciation then tends to slow down, but it rarely stops. The value keeps dropping as more mileage is put on the car.
According to a report by Carwow, depreciation drops to around 10-15% per year from the start of the second year. After eight years, the depreciation rate drops even further. If you were to buy a three-year-old car for £30,000, it might be worth around £18,000-20,000 after three more years.
If the car is written off or stolen during that time, the standard insurer usually bases the payout on the current market value. Due to troublesome depreciation, that is likely to leave the driver with a shortfall. To prepare for this situation, some drivers decide to explore their used car depreciation options.
How to reduce used car depreciation
Stopping depreciation is almost impossible. A car losing its value is just natural. Even something as simple as adding a second or third driver to its list of owners can reduce the value. But there are steps that drivers can take to help maintain a stronger resale price.
It’s vital to keep the car clean and well-maintained. Unfortunately, parts break over time. If the repair is carried out quickly and professionally, then it reduces the chances of something else happening in relation to that incident.
Drivers should make sure they are getting the car regularly serviced. A consistent service history that remains up to date helps give future buyers confidence. Where possible, try to keep the mileage low.
Is GAP insurance worth it on a used car?
Whether used car GAP insurance is relevant will depend on several factors such as the vehicle value, age and mileage. As depreciation is less impactful on used cars, many drivers rely on their standard motor insurance alone. Others may look to explore available GAP options where there may be a potentially large shortfall following a write-off or theft.
Examples of situations where drivers sometimes consider used car GAP insurance:
- The car isn’t “old” and may still lose a significant amount of value
- The deposit on it was small, leading to a long-term lease
- The particular model loses value more quickly than other cars
- The car was bought recently, and the owners want to protect the amount they paid for it if the car is written off soon after purchase
Do you need GAP insurance for a used car?
No, GAP insurance is not a legal requirement, regardless of whether you have purchased a brand new car or have opted for a second-hand deal. You must have third party insurance as a minimum in the United Kingdom.
Many drivers are happy with just standard insurance, but others choose to explore GAP options, as it is something that can potentially provide extra financial protection in the worst-case scenario.For those who want to consider their options, InsureWorks makes it simple to compare GAP insurance quotes. Without the jargon and faff, InsureWorks helps arrange quotes quickly. We arrange GAP insurance on a non-advised basis as an appointed representative of Your Company Matters Ltd. Policies are underwritten by a panel of insurers (shown at the quote stage).