Show me an example
Lets take a look at a common and typical scenario....
| Mr Smith buys a vehicle for an agreed inclusive price | £15,000.00 |
| He pays a deposit of | £ 1,000.00 |
| He finances with the dealer's finance company the balance of | £14,000.00 |
| Financing at 5% per annum over 5 years the total interest payable is | £ 3,500.00 |
| On the day he drives away, Mr Smith owes the lender (more than he paid for the vehicle) | £17,500.00 |
Sadly, after 24 months of happy motoring Mr Smith's car is stolen and written off by his insurer. |
|
| To settle his finance agreement on the car he no longer has, | |
| Mr Smith is required to pay his lender | £ 9,750.00 |
| But Mr Smith's insurer will only pay | £ 7,500.00 |
| Mr Smith therefore needs to pay his lender the difference, just to clear his debt |
£ 2,250.00 |
| If Mr Smith had purchased Premium Finance Gap Insurance, the policy would have paid £2,250.00 to his lender on his behalf. The 'Gap' differences are often substantially higher in agreements with 'balloon' payments or 'option to purchase' payments. |
