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BMW and the case for Gap Insurance
BMW is a German automobile manufacturer. It was founded in 1916 and has had several successful models, including the 3-Series and 5-Series. The company is known for its performance and luxury cars. BMW also owns Rolls Royce Motor Cars Ltd., which makes ultra high-end cars such as the Phantom and Ghost lines of vehicles sold worldwide. In addition, BMW produces motorcycles under the brand name BMW Motorrad through subsidiary companies such as Husqvarna or Friese Machine Works GmbH (BMWFMW).
In 2016, it produced 2,359,760 automobiles (figures provided by Statista.com), with about 55% exported to other countries. As of 2020, it is one of the top 15 largest manufacturers in terms of worldwide sales according to Fortune Global 500, with sales over $115 billion.
BMW is known for its quality automobiles. Thus it is no wonder that BMW vehicles come with a 'prestige' price tag. Sometimes, the depreciation rates are so dramatic that they can hit 60% or more in only three years (based on data from CAP HPI for a BMW 2 Series purchased in 2021).
To help protect their investment, many BMW owners look for additional protection beyond the manufacturer's warranty and extended maintenance plans. One option available to them is Gap Insurance.
Gap insurance was developed initially by automobile dealerships to provide coverage for their new car loan and lease contracts. If a car were written off in an accident or stolen, the leaseholder would have to pay off the lease contract for the rest of its term (which can be several years long). The Gap Insurance could cover the difference between the motor insurers settlement and what was left owing on the lease.
Nowadays, there are more options for protecting your BMW with Gap Insurance, and they are as follows.
Lease & Contract Hire Gap Insurance - designed to protect lease agreements where you have no option to own the vehicle, e.g. a contract hire lease. The Gap cover covers any shortfall between the motor insurers settlement when the car is written off and the outstanding lease amount.
Combined Return to Invoice Gap Insurance - this is usually the form of Gap Insurance offered by BMW dealers for outright sales and purchases on P.C.P. or H.P. The Gap cover is designed to cover the difference between the motor insurers settlement and the higher of the original Invoice and the outstanding finance settlement.
Combined Vehicle Replacement Gap Insurance - this is the most comprehensive Gap cover available from GapInsurance123. It is looking to cover the difference between the motor insurers settlement and the higher of:
If you have secured your BMW on a lease with no option to own it at the end, e.g. a contract hire agreement, then the ONLY Gap policy suitable for you is the Lease & Contract Hire Gap Insurance.
The reason for this is that for Combined Return to Invoice or Combined Vehicle Replacement cover, you must own the vehicle from the start or have the ability to buy the car written into the finance agreement.
With a contract hire agreement, if the BMW is written off during the lease term, your liability is to make sure you can pay the lease off. Your motor insurer will provide you with a settlement for the BMW if it is written off. There is no guarantee this is enough to settle the remainder of the lease, however.
The Lease and Contract Hire Gap can pay any shortfall between the motor insurers settlement and the outstanding lease settlement when the motor insurer writes off the vehicle.
If you buy the BMW for cash or take a loan of some kind that allows you ownership of the vehicle, then both Combined Return to Invoice and Combined Vehicle Replacement Gap are available to you.
The main difference between the two is that if the cost of the equivalent BMW at the time of claim is more than you originally paid. If this happens, then with Vehicle Replacement Gap, the extra cost of the replacement is added to your settlement. With Return to Invoice Gap, you are capped at the price you originally paid.
The equivalent vehicle is the same age, mileage, specification and condition as your BMW was on the day you bought it.
So if the BMW was a brand new 420i M Sport Coupe, then the equivalent vehicle is a brand new 420i M Sport Coupe at the time you claim.
If the BMW was a two-year-old 520 D S.E. Auto saloon with 15,000 miles on the clock when you bought it, then the equivalent BMW is a 2-year-old 520D S.E. Auto saloon with 15,000 miles at the time you claim.
When you make a claim, if the cost of the equivalent BMW model is higher than the original price you paid, that extra is added to your Gap Insurance settlement for V.R.I. Gap cover.
Some BMW models are excluded from the Gap Insurance products that GapInsurance123 can provide. Here we give a correct list at the time of writing (September 2021), but for an up to date list, please refer to the policy documents.
BMW 'M' variants, except 'M Sport'.
In other words, M2, M3, M4, M5, M Competition etc., are excluded from cover. M Sport is fine.
All BMW X5 excluded from cover
All BMW X6 excluded from cover
All BMW X7 excluded from cover
No, Gap Insurance is not a compulsory requirement to buy any car, including a BMW. It is the vehicle owner's choice if they want to buy Gap Insurance to protect the purchase.
No, you can buy Gap Insurance for a BMW from many providers. These will include the motor dealer usually but could also have a finance company or your motor insurance company. Of course, you can compare your gap insurance quote against the GapInsurance123 products and see which you prefer.
Selling Gap Insurance is highly regulated. You need to ensure that whoever you buy Gap Insurance from is authorised and regulated by the Financial Conduct Authority in the United Kingdom.
The answer to this question often depends on where you buy your Gap Insurance policy. If you get Gap Insurance (also known as Guaranteed Asset Protection) from the BMW main dealer, this can be much more expensive than buying from an independent brand like GapInsurance123.
Reasons for the price difference include paying the higher rate of Insurance Premium Tax (20%) at the dealer, where you usually pay the standard rate of I.P.T. of 6%.
Gap Insurance for BMW can cover you in a few different ways. All Gap insurance types are designed to top up the settlement you get from your motor insurance when your vehicle is declared a total loss.
The motor insurer may only pay you in settlement to the current market value of the vehicle. This could be far less than the original amount you paid for the car.
Lease & Contract Hire Gap can cover a shortfall on a lease payment. Return to Invoice can cover a shortfall back to the original invoice price you paid. Finally, Vehicle Replacement Gap can cover any shortfall to the cost of the equivalent replacement vehicle.
Which type is best for you depends on which way you have secured your BMW.
A BMW dealer does not necessarily have to sell Gap Insurance. They have to be authorised to arrange the sale of insurance products with the F.C.A. They also have to choose to provide Gap Insurance.
The Gap Insurance market has grown with more providers coming into the market. As a result, many dealers could decide that selling Gap cover to their customers is demanding from a regulatory perspective, so do not expect all dealers to provide access for you.