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When customers are looking for Gap Insurance, it is only natural they are looking for the very best value. The 'value' is simply not about the price of the premium you pay, but also the policy terms and features.
We have had a case recently where a customer was originally quoted £400 by their motor dealer for Gap Insurance. They then found a three year quote on GapInsurance123 for less than £150. Naturally they then bought the GapInsurance123 policy and informed the dealer that they did not want to buy the policy from them. The dealer then agreed to price match the Gap Insurance premium we had provided, if the customer wanted to buy the policy from them.
This situation happens rarely, as motor dealers normally cannot compete with the policies provided by online providers. However, we do understand that a customer may find it convenient to buy the policy from the dealer, especially if it is tied in to a finance deal.
However there are some aspects you should be cautious with in doing this.
1 - It may not be the same level of cover - In the recent case we found that the motor dealer was only providing a Combined Return to Invoice cover, we were quoting the Combined Vehicle Replacement style of Gap. In this case the customer had got a substantial discount on the new vehicle, and by only having Invoice protection from the dealer they were likely to see a much lower settlement in the event of a claim.
2 - Price match = Invoice 'write back'? - In order to price match the premium, the motor dealer was looking to reduce the invoice price of the vehicle by the difference in the premiums. This enabled them to effectively sell their Gap Insurance at the original £400, but simply reduce the price of the vehicle by £250. You end up paying the price for the vehicle and the Gap.
Sounds OK? Well think again!!
By reducing the Invoice price of the vehicle (the dealers policy would not cover the cost of the Gap policy), the dealer is also reducing the amount the customer paid for the car, and therefore the amount can protect with a Return to Invoice Gap from the dealer.
What is an invoice 'write back'?
Lets say the vehicle is £20000 and the dealer wants to charge £400 for Gap Insurance. You say you can get it for £150, so they agree to match it.
So you may assume this would leave the invoice price at £20000 and show the Gap at £150, leaving the balance at £20150. However they may reduce the price of the vehicle to £19750, and leave the Gap at £400, still leaving the balance at £20150. However, in doing this the invoice price has been reduced to £19750, meaning £250 less paid out in a claim!
Even if the customer was to buy the Combined Return to Invoice from ourselves, they would still protect more than they could with the dealer, as the dealer would not reduce the price of the car if the Gap was not bought from them.
If you are considering a 'price match' Gap with the dealer you may want to ask yourself:
-Is it the equivalent level of cover?
-Are they altering the invoice (and lowering your potential settlement) to do it?