If you are confused about contract hire gap insurance you are not alone.
Part of my job is to monitor what is published on various websites and blogs and wow there is a lot of information about gap insurance and especially contract hire gap insurance.
So why is so much time aimed at contract hire gap insurance ?
Why are there so many different explanations about how contract hire gap insurance works?
So lets try and set the record straight once and for all.
Contract hire gap insurance is really very easy to understand.
You buy a vehicle on contract hire and pay three payments in advance followed by 35 further payments of £290 & vat.
Your contract hire company will have based your rentals no only on how much they will be paid from you in the form of rentals buy also how much they think that your vehicle will be worth at the end of the contract. Don’t forget that under your contract hire agreement you have to hand the vehicle back, and when you do they will dispose( re-sell ) it on and again make another profit.
The residual value (how much it is worth at the end of the contract ) can make a huge difference to how much you pay each month. You only need to get a few contract hire quotes to see that for example you can buy an Audi A6 or Mercedes for just over £300 per month, not bad when for around the same price you could have a Chevrolet Orlando.
Nothing against Chevrolet they build good cars but given the choice would i rather have an E class estate or an A6 well hey that’s just me.
Ok so you buy your vehicle on contract hire and 18 months in it is stolen and written off. Your motor insurance company give you market value of lets say £20,000.
Your contract hire company send you a settlement letter of £28950. Depending upon the suppliers website you have been on they may have described this as outstanding rentals or a settlement.
Either way it is just a financial shortfall an amount that your contract hire company request to close the account.
This is what Contract hire gap insurance can protect you against.