Financial

Should We Buy a Gap Cover for Used Cars

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I bought a second hand Nissan and one friend of mine asked me did I get a gap cover for my Japanese four- wheel friend. I was confused and to be honest, I wanted to do everything it takes not to pay another tax. I hardly managed to collect the money for it and paying for a regular insurance policy, so gap cover wasn’t something that I needed at that time. However, I started searching about different options and talked with different people about it. It was a totally unknown territory to me, so I had to learn from the beginning. And this is what I have found.

Gap insurance is primarily intended for people who are buying a new car, but they have to buy it on leasing or to get in on credit. However, even brand new cars lose their initial value right after you sit in them and turn the engine on. According to different stats, vehicles lose up to 40 percent of their value after the first year, and this trend continues to drop down with time. After three years, your “new” vehicle will worth only 40 percent of the starting price.

In the situation when your car is ruined in the car accident or it is stolen, the insurance company will offer you money for replacement car, but this amount will be equal to the actual value, not the value you paid in the beginning. This means that you will have to face the “gap” that occurred between these two values.  And this is especially tricky if you already own for your car. So, ordinary insurance is not the option and you will need a gap cover.

This is why gap insurance is needed.  But, what about the standard insurance policies? Do they cover this? Yes they do, especially if we talk about a brand new car. If your car is one year old or younger, you will not need a gap plan, because standard insurance will allow you to get a new replacement vehicle.

Gap cover and second hand cars

After this, my conclusion was that the owners of the used cars shouldn’t pay attention to a gap cover. But what this does mean? Is this mean that we cannot buy this type of insurance for used cars at all? Of course not. You can pay extra money for this option, but it is not worth it. As we said, it is a great option if you are buying a new car whose value will drop down quickly. This is some kind of the protection for a bad investment.

Used cars do not fall into this category, simply because they don’t lose their value in the same way. Used cars already lost much of their initial value, so the gap between actual price and initial one is not so deep. The conclusion is that you can buy a gap cover for your used car, but is a waste of money and nothing else.

You can relax now and enjoy in your used car like I do with my five year old Nissan.

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