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What is GAP insurance? Do I need it?

Whether it’s a car lease, PCP or hire purchase, GAP insurance is something that will be likely offered during the sales process. But what is it, and do you need it?

Below we’ll go through how it works and the pros and cons so that you can make your mind up…

What is Gap Insurance?

What is GAP insurance?

Guaranteed Asset Protection is a form of insurance which, in the event of theft, accident or write-off, will pay the difference between the current market value of the car and how much is owed at the time of the incident.

Why would there be a difference in value? It’s a well-known fact that a new car can lose up to 40 percent of its value in its first year on the road, so the insurer is likely to only pay out what the car is worth at the time of the accident rather than give you what you paid for the car originally.

There are a variety of GAP insurance options available to motorists:

  • Agreed value: This will pay the difference between an insurance settlement and Glass’s guide value.
  • Return to invoice: This will pay the difference between your insurance settlement and the vehicle invoice price.
  • Contract hire: If you lease your car, this will pay the shortfall between the insurance settlement and the residual value of the car for the remainder of your term.
  • Vehicle replacement: This covers the difference between your insurance settlement and the cost of replacing the vehicle like-for-like (IE similar age, similar mileage).

Do I need GAP insurance?

GAP insurance isn’t mandatory when buying or leasing a new car, in fact your car insurance is more than likely to cover the cost of a replacement. However, it is definitely something you should consider if you want a brand new replacement or if you owe money to the car finance company, or bank, if you have taken a loan to pay for the car.

You’re not likely to need GAP insurance if you’ve bought a used car, if you don’t want a brand new car as a replacement, or if your insurance includes ‘new car replacement’.

Confused about other car finance terms? Check out our glossary…

Representative Example of Credit

We expect more than 51% of our customers to achieve this rate.

Loan Amount Total Cost of Credit Representative APR 60 Monthly Payments Deposit Amount Loan Term Total Amount Payable
£7,500 £3831 19.1% APR £188.85 £0 60 Months £11,331

All offers are subject to change at any time, you must be 18 or over and finance is subject to status, vehicle availability and terms and conditions apply. We can introduce you to a limited number of finance companies, a commission may be received. Failure to maintain payments may result in termination of your agreement and the vehicle being returned, this could affect your credit rating and make it more difficult to obtain credit in the future. All prices correct at time of publication.

We purchase a wide variety of vehicles from all over the country to ensure the best quality and value for our customers, all of our cars go through a thorough inspection process and if they do not meet our standards we do not sell them. We endeavour to inform our customers (where possible) the provenance of the vehicle they are buying and as such we will always inform you if the vehicle has previously been either an ex fleet or hire car. Should your vehicle be an ex hire/fleet car please do not be concerned as we would never value this vehicle differently when you come to part exchange it and there is no difference to the CAP valuation either.

You should try and estimate the distance you will travel as accurately as possible to try and avoid excess mileage charges at the end of your contract.

All pictures and/or photos and car descriptions on this site are for illustration and reference purposes only and are not necessarily the vehicle on offer. All offers are subject to change at any time and are subject to finance approval and vehicle availability. All prices correct at time of publication. E & OE.

Hippo Vehicle Solutions t/a Hippo Motor Finance is authorised and regulated by the Financial Conduct Authority. FRN 658076. We are a Credit Broker not a Lender and can introduce you to a limited number of lenders. Subject to status and to UK residents only (excl. the Channel Islands). Individuals must be 18 or over. Guarantees and indemnities may be required. We typically receive a fixed commission calculated by reference to the vehicle model, product or amount you borrow, for introducing you to a lender but this does not affect the interest charged on the agreement, all of which are set by the lender. Images for illustrative purposes only. Hippo Vehicle Solutions t/a Hippo Motor Finance is an Appointed Representative of AutoProtect (MBI) Limited for insurance distribution purposes. AutoProtect (MBI) Limited is authorised and regulated by the Financial Conduct Authority. Its firm reference number is 312143. You can check this at

We endeavour to ensure that all information including the specifications and finance availability are accurate. Whilst we make every effort to display correct information we are aware that errors may occur occasionally. We are not able, therefore, to guarantee the accuracy of all information especially when given to us by third parties. If you do require clarification of some information you have seen on our website, please email us at . This does not affect your statutory rights.

We are a broker not a lender and our registered office is Unit 26 Trident Park, Trident Way, Blackburn, BB13NU.