The excitement of getting a new car is almost too much to handle. We have a new shiny toy to enjoy and make the most of. However, as soon as you drive your vehicle out of the garage the value of it depreciates.
This is why financing your vehicle on PCP has become an increasingly popular option for vehicle owners in the UK. PCP is a type of loan that gives drivers the choice to spread their vehicle payments over several years. Typically, monthly payments with PCP are lower than those with hire purchases as there is a balloon payment at the end of the deal.
One of the main reasons PCP is so popular is how easy it is to roll over into another contract and get a new vehicle. Customers have a much smoother transition into a new contract without the stress of starting from scratch. Not only this but customers are somewhat protected against vehicle depreciation. What’s more, if the vehicle value decreases faster than you would expect it to, you can hand it back to the finance provider.
However, despite PCP being a great option when financing your vehicle, you must protect yourself from any unexpected damage that might happen through your loan term. For example, you could be in an accident, leaving your car written off. Direct Gap touches on this by saying that “in the event of your vehicle being declared a total loss through an accident, your car insurance will only pay out what the car value is at that time.” Not only this but, “as car’s value depreciates, you may find you have left out of pocket if your car is written off.” By leaving yourself unprotected, you run the risk of losing the money invested in your vehicle and having to start a new PCP contract.
To protect yourself against financial loss, taking out PCP GAP insurance is the safest option. In the event of your car being written off, “GAP insurance protects owners with this shortfall, and will pay the difference between the outstanding finance balance and the motor insurers settlement.” As well as this, if you get the right GAP insurance, you could get all your drivers protected on the policy, cover for up to 5 years, deposit protection and more.