Why you shouldn't take out GAP insurance from your motor dealer

Why you shouldn't take out GAP insurance from your motor dealer

Thinking Of Buying GAP Insurance From Your Car Dealership? Here's Why You Should Reconsider...

One thing that makes buying a car from a dealership stressful is that the salesperson will encourage you to take out every add-on they offer. This will include things like scratch and dent insurance, paint protection, a service plan and, of course, GAP insurance. It can be challenging to leave the showroom without spending an extra £1,000 or more!

We're here to tell you that there are equivalent or better products available online that could save you a lot of money, without sacrificing quality.

"Dealership policies have no material advantage over those of internet providers, so there is no justifiable reason for the inflated prices."

Motor Dealers Must Tell You About Alternative GAP Insurance Providers

The UK consumer market for GAP Insurance is authorised and regulated by the Financial Conduct Authority (FCA), both in dealerships and online.

Back in 2015, the FCA enforced mandatory instructions to all motor dealers in the UK with regards to selling GAP insurance:

1. They may not discuss GAP insurance with you and then sell it to you on the same day. There must be a minimum of 48 hours to enable you to consider whether you will purchase the cover
2. It must be made clear that GAP insurance cover is not a legal requirement
3. They must make it clear that there are other GAP insurance providers to consider

If a dealer fails to comply with these instructions, they will be in breach of FCA regulations and could be struck off.

Can Dealer Policies Be Better?

A branded policy from your motor dealer may feel like something to be confident in. You may be told it's better to consolidate everything with a single partner. However, the reality is that these policies are outsourced to third-party providers who pay a fee to use their brand name.

The dealer does not handle these claims, and even the most basic queries will be diverted to the third party (or, sometimes, to the wrong person entirely since the dealership staff can't keep track of who their policy providers are).

As well as this, dealership policies are often sold as having the advantage of 'paying monthly', with costs being added to your finance breakdown. However, this makes it appear that monthly policies aren't available elsewhere when actually they are quite commonplace.

In fact, most online insurers offer pay monthly GAP Insurance, Tyre & Alloy Insurance and ASU Cover.

Why Are Dealership GAP Policies So Expensive?

The answer is simple: profit. Dealer policies have virtually nothing to do with the dealership or manufacturer, and their terms and conditions are roughly equatable to those of online providers. But the motor dealers inflate the prices to make more significant profits and pay higher commissions to their staff. In some cases, dealer prices are 2-3 times that of online insurers like Direct Gap.

Dealership policies have no material advantage over those of internet providers, so there is no justifiable reason for the inflated prices. As we've already covered, if you should need to use your policy you won't really 'benefit' from having bought in a bricks and mortar location as the claims process, enquiries and everything in between is handled via a thrid party.

What Should I Be Looking Out For?

It is common for dealership staff to warn customers off using an online provider for GAP insurance. There is some merit to this since, although the FCA regulates all providers, the number of unrated underwriters being used has increased. It is wise to steer clear of these situations as there is a risk of the insurer going bust, leaving policyholders out of pocket and without cover.

When you go with an established and experienced provider, you can trust their work far more than a dealership that operates a profit-based arrangement with an unknown third party.

On the topic of what to look out for, the most straightforward answer is sales tactics. Any attempt to get you to take out GAP insurance on the same day is a breach of FCA regulations. Any baseless statements to tempt you into ignoring online providers is pure salesmanship.

If, at any point, you feel pressured, you should walk away from the conversation.

Contact A Trusted Provider For Advice

Don't make any decisions about GAP insurance lightly. Remember, it isn't a legal requirement, and a salesperson's shouldn't be telling you otherwise. If you have any questions, contact us and take advantage of our expert GAP Insurance team. Alternatively, you can get a quote online in just a few clicks and see for yourself how much cheaper it can be to choose an internet company over your dealership.

It pays to have insurance cover in case something unforeseen happens, but it's essential to have the right cover in place from a trusted provider.

James Cartwright

James Cartwright

James is an innovator in the Gap Insurance market with a longstanding understanding of automotive and Gap Insurance and consumer trends. In authoring these articles he brings together over 20 years of industry experience and a lifetime as an automotive enthusiast.

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