OV9

I remember the whole 'lease/insurance/gap' threads from the last forum, but I'm not sure I understand it from a PCP perspective.

So, say for example a car is £30k, and the manufacturer is doing a 0% deal on it.

Say you put down £10k deposit, pay £10k over 36 months (£277.78 a month) and then have a £10k balloon at the end.

Now, imagine your car is written off after year 1, by a third party.

You're in for about £13,333 by this point. The car is likely in negative equity. How do you get a decent pay out in this situation? I assume gap picks up the shortfall, if you have it, but it's gonna cost you another £10k to get into a replacement in the same situation as before.

So what gives?

I’ve never done it personally but I believe GAP insurance just clears the finance. I don’t think they’ll put you back in exactly the same position - i.e. provide you with your deposit back to place on a new lease. I don’t think there’s any product that will do that. Just tough titties as they’d say in that particular situation.

ETA: technically you’ve suffered loss from a civil claim perspective but I very much doubt an insurer would recognise it as such and good luck pursuing them or the other driver (presuming it wasn’t your fault of course) for the extra through the courts.

The GAP which Seb has will pay you back up to the invoice value.

Consider, though, buying that same £30k car outright and having it written off at the same point. Your insurer pays out market value which should be the sum required to get you a vehicle of equivalent age/condition at the date of the write off. You don’t have that negative equity problem. You’ve lost the depreciation already suffered, as is the case with your PCP example; but if you’ve put down £10k and the whole of that has gone, you’ve bought a seriously depreciating car!

Jobbo wrote: Sat May 05, 2018 6:58 am The GAP which Seb has will pay you back up to the invoice price

I stand corrected in that case.

Seems like a sensible precaution if you’ve put down a large cash deposit.

Anyone who puts down anything more than the minimum deposit when PCP-ing (or leasing for that matter) is doing it wrong. HTH.

I did some Googling and apparently, in this price range, buying a Renault Zoe would lose you £21,700 of your £30k in year 1, or a Vauxhall Cascada would lose you £20k. Those are heroic levels of depreciation.

NotoriousREV wrote: Sat May 05, 2018 9:08 am Anyone who puts down anything more than the minimum deposit when PCP-ing (or leasing for that matter) is doing it wrong. HTH.

On my example, in a 0% PCP deal I'd agree with you. But say it's 5.9%. Any money that you don't put up front will cost you more in interest payments on your monthlies - likely more than you'd be earning in the bank at any rate. So by the end of the term, whether you had back the car or pay the balloon, you'll be worse off putting buttons down as a deposit.

Thanks Jobbo - I'm reminded by that conversation now and did some research to see what's around.