Gap insurance can be useful for people with new cars, Auto Trader says - due to the fact that the vehicles tend to lose value quickly.
Guaranteed Asset Protection (Gap) cover should only be considered by car insurance customers who drive newer models, Auto Trader warned today.
The industry experts issued the guidance following the release of car value depreciation statistics from the AA, which showed that the average vehicle is worth 40 per cent less after a year if bought new. The AA study also found that, assuming that the driver is on the road for 10,000 miles each year, it loses 60 per cent of its value after three years.
These sharp declines have led to Gap insurance, which is designed to shore-up the gap between a vehicle's original value and what the insurer pays if the car is later stolen or damaged, achieving increasing prominence. Gap is generally used to clear debts owed from the car's purchase, or to help fund the purchase of a replacement vehicle.
Tom White, spokesperson for Auto Trader, explained: "The newer and higher value of the vehicle, the greater the depreciation will potentially be and therefore Gap will have greater relevance." He added: "Not all drivers should consider Gap. If the car is over a particular age (seven or more years) then Gap Insurance will typically not be offered."
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