Table of Contents
What is GAP insurance and what problem does it solve
How it works in the event of a total write-off
Types of GAP insurance available on the market
When it makes the most sense to offer it to the buyer
How to sell it within the buying and selling process
How much can the dealership earn from GAP insurance
GAP insurance providers working with dealerships
Dealcar and managing add-on products in each file
Frequently Asked Questions
What is GAP insurance and what problem does it solve
GAP stands for Guaranteed Asset Protection. It is a complementary insurance to comprehensive insurance that covers the financial difference between the market value of the vehicle at the time of the claim and the outstanding amount on the finance agreement.
The problem it solves is real and common. A buyer takes home an £18,000 car, financing £15,000 over 5 years. After 18 months, the car is involved in an accident leading to a total loss. The comprehensive insurance pays the market value of the car at that moment, which after 18 months of depreciation might be £12,500. But the client still owes the finance company £11,000. The difference between the £12,500 they receive and the £11,000 they owe leaves them with only £1,500 to start over with a replacement vehicle.
Without GAP insurance, the buyer is left in a difficult financial situation. With it, the shortfall between the insurance payout and the outstanding finance is covered, and in some forms, they even receive additional funds towards the deposit for their next vehicle.
Check out the guide on how to finance cars as a dealership.
How it works in the event of a total write-off
The typical process when GAP insurance is activated involves three steps. First, the vehicle's comprehensive insurance processes the claim and determines the market value of the car at the time of the accident. This amount is paid directly to the customer or to the finance company if the car was financed.
Second, the customer or the dealership contacts the company that issued the GAP policy and submits the claim documentation: the main insurer's report, a certificate of outstanding finance, and the vehicle documents.
Third, the GAP insurer pays the difference between the market value paid by the main insurer and the outstanding finance. In options that include money for a new vehicle, that amount is also added.
The usual resolution time is between 15 and 30 days from the submission of the complete documentation.
Types of GAP insurance available on the market
There are three main types, with different coverages and prices.
Finance GAP. Covers only the difference between the market value and the outstanding finance balance. This is the most basic and economical option. Guideline price for a £15,000 car over 5 years: between £200 and £350 as a single premium.
Read also about the differences between trade-in value and market value of a car.
Invoice GAP. Covers the difference between the original purchase price of the vehicle (as shown on the invoice) and the market value at the time of the claim. It is more comprehensive than Finance GAP because the invoice price is always higher than the outstanding finance. Guideline price: between £300 and £500 as a single premium.
GAP with deposit for new vehicle. In addition to covering the financial shortfall, it includes extra cash (usually between £1,000 and £3,000) for the customer to use as a deposit on their next car. This option is the most complete and the one that best facilitates loyalty: the customer returns to buy their next car from you. Guideline price: between £400 and £700 as a single premium.
Type | What it covers | Guideline price |
|---|---|---|
Finance GAP | Difference between market value / outstanding balance | £200-£350 |
Invoice GAP | Difference between purchase price / market value | £300-£500 |
GAP with new vehicle deposit | The above + deposit for next car | £400-£700 |
When it makes the most sense to offer it to the buyer
GAP insurance has the most value for the buyer in three specific situations.
First: when the vehicle is financed with a small deposit or no deposit at all. If the buyer finances 90% or 100% of the car's price, the difference between the outstanding loan and the market value can be very wide during the first 24 months. This is the customer profile where GAP makes the most financial sense.
Second: when the vehicle has high depreciation. High-end cars, electric vehicles, and models that lose value quickly on the used market are those that most expose the buyer to the risk of being "negative equity" with their finance.
Check which car models appreciate and which lose the most value.
Third: when the buyer uses the car intensively or under higher-risk conditions. An independent contractor driving 40,000 km a year is more likely to experience a total write-off than someone who uses the car for short city commutes.
The profile where GAP has the least value is the cash buyer or someone who finances a small portion with a large deposit. If the car is worth £12,000 and the buyer puts down an £8,000 deposit while financing only £4,000, the risk of being short is minimal.
How to sell it within the buying and selling process
The time to present GAP insurance is when the finance deal has already been approved and the buyer is reviewing the contract conditions. At this point, the customer is clear that they are going to finance, they already know the monthly payment, and they are in closing mode.
Also check out how to sell monthly payments instead of overall price when financing a car.
The presentation should be brief and direct. It is not about explaining all the technicalities of the product, but about explaining the problem it solves: "Now that you are financing the car, if you suffer a total write-off in the coming years, your comprehensive insurance will pay you the market value of the car, which is always less than what you owe the finance company. GAP covers that difference. For X amount in a single premium, you have that peace of mind covered."
The most common objection is "I already have comprehensive insurance". The response: comprehensive insurance pays the market value of the car at the time of the accident, not what you owe. They are two different things. You can illustrate this with specific numbers for the vehicle they have just bought.
Including the GAP cost in the finance package, if the buyer prefers, makes the close easier. Adding £300 to a £12,000 loan over 5 years is less than £6 extra per month. Presented this way, the decision is much easier.
How much can the dealership earn from GAP insurance
The commission the dealership receives for brokering the sale of GAP insurance varies by provider and volume of deals, but is typically between 20% and 40% of the net premium.
With an average premium of £350 and a 30% commission, the income per transaction is £105. If you close GAP on 40% of financed deals and you have 20 financed deals a month, that is 8 GAP sales a month: £840 extra money monthly with no significant additional operating cost.
Read also how extended deposit / warranty works as an additional source of income.
With higher volume or access to options with higher premiums (such as GAP with a deposit for a new vehicle), income can easily exceed £1,500 or £2,000 a month. These are recurring earnings generated as a byproduct of the sales process you are already carrying out.
To access the best commission rates, you need a guaranteed minimum volume and, in some cases, certified training in insurance mediation. Many GAP providers have specific programmes for dealerships with attainable entry requirements.
GAP insurance providers working with dealerships
In Spain, the main providers of GAP insurance for dealerships are companies specialised in automotive insurance such as Opteven, Assurant, AXA Partners, Mapfre (through its line of products for the automotive sector) and some extended warranty companies that have expanded their catalogue with GAP products.
The conditions vary significantly between providers: commission percentage, available options, timescales for resolving claims, and training requirements. Before signing with a provider, it is advisable to compare at least two or three options and review the general conditions of the policy in detail.
Some extended warranty providers you already work with may offer GAP as a complementary product under the same commercial agreement, which simplifies administrative management.
Dealcar and managing add-on products in each file
Keeping track of which deals include GAP, extended warranty, or vehicle insurance is administrative work that piles up as volume grows. In Dealcar you can register all add-on products within each sale's file, giving you visibility over what percentage of your operations include complementary products and how much they are contributing to your total turnover.
If you want to see how file management works in Dealcar, request a demo at dealcar.io.
Frequently Asked Questions
Is GAP insurance compulsory when financing a car?
No. It is an optional product that the buyer takes out voluntarily. No law or finance company can force the buyer to take out GAP as a condition for accessing finance. If any salesperson presents it as a mandatory requirement, it is an incorrect practice.
Can you take out GAP after buying the car?
It depends on the provider. Some allow it to be taken out up to 30 or 90 days after purchase. Others only offer it at the point of sale. In general, the best time to take it out is when the deal is signed, because the price is usually better and the administrative process is simpler.
Does GAP also cover car theft?
Yes, provided that the comprehensive insurance includes theft cover. If the vehicle is stolen and the comprehensive insurance pays the market value, GAP covers the shortfall to the outstanding finance, just like in a total write-off due to an accident.
Do I need an insurance intermediary licence to sell GAP?
Yes. To regularly broker insurance sales, you need to be registered as an insurance broker or agent, or act as an associated bancassurance operator, in accordance with the Mediation in Private Insurance and Reinsurance Act. Some GAP providers have structures that allow the dealership to act under their licence through a partnership agreement, which simplifies access to the product. Consult with the provider on legal requirements before starting to offer the product.
Table of Contents
What is GAP insurance and what problem does it solve
How it works in the event of a total write-off
Types of GAP insurance available on the market
When it makes the most sense to offer it to the buyer
How to sell it within the buying and selling process
How much can the dealership earn from GAP insurance
GAP insurance providers working with dealerships
Dealcar and managing add-on products in each file
Frequently Asked Questions
What is GAP insurance and what problem does it solve
GAP stands for Guaranteed Asset Protection. It is a complementary insurance to comprehensive insurance that covers the financial difference between the market value of the vehicle at the time of the claim and the outstanding amount on the finance agreement.
The problem it solves is real and common. A buyer takes home an £18,000 car, financing £15,000 over 5 years. After 18 months, the car is involved in an accident leading to a total loss. The comprehensive insurance pays the market value of the car at that moment, which after 18 months of depreciation might be £12,500. But the client still owes the finance company £11,000. The difference between the £12,500 they receive and the £11,000 they owe leaves them with only £1,500 to start over with a replacement vehicle.
Without GAP insurance, the buyer is left in a difficult financial situation. With it, the shortfall between the insurance payout and the outstanding finance is covered, and in some forms, they even receive additional funds towards the deposit for their next vehicle.
Check out the guide on how to finance cars as a dealership.
How it works in the event of a total write-off
The typical process when GAP insurance is activated involves three steps. First, the vehicle's comprehensive insurance processes the claim and determines the market value of the car at the time of the accident. This amount is paid directly to the customer or to the finance company if the car was financed.
Second, the customer or the dealership contacts the company that issued the GAP policy and submits the claim documentation: the main insurer's report, a certificate of outstanding finance, and the vehicle documents.
Third, the GAP insurer pays the difference between the market value paid by the main insurer and the outstanding finance. In options that include money for a new vehicle, that amount is also added.
The usual resolution time is between 15 and 30 days from the submission of the complete documentation.
Types of GAP insurance available on the market
There are three main types, with different coverages and prices.
Finance GAP. Covers only the difference between the market value and the outstanding finance balance. This is the most basic and economical option. Guideline price for a £15,000 car over 5 years: between £200 and £350 as a single premium.
Read also about the differences between trade-in value and market value of a car.
Invoice GAP. Covers the difference between the original purchase price of the vehicle (as shown on the invoice) and the market value at the time of the claim. It is more comprehensive than Finance GAP because the invoice price is always higher than the outstanding finance. Guideline price: between £300 and £500 as a single premium.
GAP with deposit for new vehicle. In addition to covering the financial shortfall, it includes extra cash (usually between £1,000 and £3,000) for the customer to use as a deposit on their next car. This option is the most complete and the one that best facilitates loyalty: the customer returns to buy their next car from you. Guideline price: between £400 and £700 as a single premium.
Type | What it covers | Guideline price |
|---|---|---|
Finance GAP | Difference between market value / outstanding balance | £200-£350 |
Invoice GAP | Difference between purchase price / market value | £300-£500 |
GAP with new vehicle deposit | The above + deposit for next car | £400-£700 |
When it makes the most sense to offer it to the buyer
GAP insurance has the most value for the buyer in three specific situations.
First: when the vehicle is financed with a small deposit or no deposit at all. If the buyer finances 90% or 100% of the car's price, the difference between the outstanding loan and the market value can be very wide during the first 24 months. This is the customer profile where GAP makes the most financial sense.
Second: when the vehicle has high depreciation. High-end cars, electric vehicles, and models that lose value quickly on the used market are those that most expose the buyer to the risk of being "negative equity" with their finance.
Check which car models appreciate and which lose the most value.
Third: when the buyer uses the car intensively or under higher-risk conditions. An independent contractor driving 40,000 km a year is more likely to experience a total write-off than someone who uses the car for short city commutes.
The profile where GAP has the least value is the cash buyer or someone who finances a small portion with a large deposit. If the car is worth £12,000 and the buyer puts down an £8,000 deposit while financing only £4,000, the risk of being short is minimal.
How to sell it within the buying and selling process
The time to present GAP insurance is when the finance deal has already been approved and the buyer is reviewing the contract conditions. At this point, the customer is clear that they are going to finance, they already know the monthly payment, and they are in closing mode.
Also check out how to sell monthly payments instead of overall price when financing a car.
The presentation should be brief and direct. It is not about explaining all the technicalities of the product, but about explaining the problem it solves: "Now that you are financing the car, if you suffer a total write-off in the coming years, your comprehensive insurance will pay you the market value of the car, which is always less than what you owe the finance company. GAP covers that difference. For X amount in a single premium, you have that peace of mind covered."
The most common objection is "I already have comprehensive insurance". The response: comprehensive insurance pays the market value of the car at the time of the accident, not what you owe. They are two different things. You can illustrate this with specific numbers for the vehicle they have just bought.
Including the GAP cost in the finance package, if the buyer prefers, makes the close easier. Adding £300 to a £12,000 loan over 5 years is less than £6 extra per month. Presented this way, the decision is much easier.
How much can the dealership earn from GAP insurance
The commission the dealership receives for brokering the sale of GAP insurance varies by provider and volume of deals, but is typically between 20% and 40% of the net premium.
With an average premium of £350 and a 30% commission, the income per transaction is £105. If you close GAP on 40% of financed deals and you have 20 financed deals a month, that is 8 GAP sales a month: £840 extra money monthly with no significant additional operating cost.
Read also how extended deposit / warranty works as an additional source of income.
With higher volume or access to options with higher premiums (such as GAP with a deposit for a new vehicle), income can easily exceed £1,500 or £2,000 a month. These are recurring earnings generated as a byproduct of the sales process you are already carrying out.
To access the best commission rates, you need a guaranteed minimum volume and, in some cases, certified training in insurance mediation. Many GAP providers have specific programmes for dealerships with attainable entry requirements.
GAP insurance providers working with dealerships
In Spain, the main providers of GAP insurance for dealerships are companies specialised in automotive insurance such as Opteven, Assurant, AXA Partners, Mapfre (through its line of products for the automotive sector) and some extended warranty companies that have expanded their catalogue with GAP products.
The conditions vary significantly between providers: commission percentage, available options, timescales for resolving claims, and training requirements. Before signing with a provider, it is advisable to compare at least two or three options and review the general conditions of the policy in detail.
Some extended warranty providers you already work with may offer GAP as a complementary product under the same commercial agreement, which simplifies administrative management.
Dealcar and managing add-on products in each file
Keeping track of which deals include GAP, extended warranty, or vehicle insurance is administrative work that piles up as volume grows. In Dealcar you can register all add-on products within each sale's file, giving you visibility over what percentage of your operations include complementary products and how much they are contributing to your total turnover.
If you want to see how file management works in Dealcar, request a demo at dealcar.io.
Frequently Asked Questions
Is GAP insurance compulsory when financing a car?
No. It is an optional product that the buyer takes out voluntarily. No law or finance company can force the buyer to take out GAP as a condition for accessing finance. If any salesperson presents it as a mandatory requirement, it is an incorrect practice.
Can you take out GAP after buying the car?
It depends on the provider. Some allow it to be taken out up to 30 or 90 days after purchase. Others only offer it at the point of sale. In general, the best time to take it out is when the deal is signed, because the price is usually better and the administrative process is simpler.
Does GAP also cover car theft?
Yes, provided that the comprehensive insurance includes theft cover. If the vehicle is stolen and the comprehensive insurance pays the market value, GAP covers the shortfall to the outstanding finance, just like in a total write-off due to an accident.
Do I need an insurance intermediary licence to sell GAP?
Yes. To regularly broker insurance sales, you need to be registered as an insurance broker or agent, or act as an associated bancassurance operator, in accordance with the Mediation in Private Insurance and Reinsurance Act. Some GAP providers have structures that allow the dealership to act under their licence through a partnership agreement, which simplifies access to the product. Consult with the provider on legal requirements before starting to offer the product.
