£5,000 a month, £199 total
Write-off shortfall
£5,000
GAP policy cost
£199
The gap GAP would cover
- Out of pocket without GAP
- £5,000
- Out of pocket with GAP
- £199
If your car is written off, a motor insurer pays its market value — often less than you still owe. GAP covers that shortfall. Weigh the policy cost against the gap and how fast your car drops in value.
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How we work this out
Shortfall = outstanding finance (settlement figure) − insurer's write-off payout (the car's market value). GAP insurance covers this shortfall. A positive shortfall is what you would otherwise owe with no car; if it is zero or negative, GAP pays nothing.
GAP is optional and only pays if the car is written off or stolen. Weigh the premium against the shortfall and how fast the car depreciates.
Full method: how we calculate.
GAP insurance pays the shortfall between your insurer's payout when a financed car is written off and the settlement figure you still owe, money you would otherwise have to find yourself. On a £25,000 car written off two years in, an insurer payout of £15,000 against an £18,000 settlement figure leaves a £3,000 shortfall, and that is what GAP covers.
Enter the car's current value and your settlement figure into the calculator above to see your own shortfall, then weigh the GAP premium against that risk. The rest of this page covers when GAP is worth it, the GAP types and how a claim works.
What is GAP insurance?
GAP (Guaranteed Asset Protection) insurance pays the difference between your insurer's write-off payout and the finance you still owe. Without it, you could be left owing money on a car you no longer have.
If your financed car is written off or stolen, your standard insurer pays its current market value, not what you owe. Because cars depreciate faster than the finance falls, that payout can be thousands less than your settlement figure. GAP covers that gap.
How the shortfall works
The GAP shortfall is your outstanding finance minus the insurer's payout: the amount you would still owe with no car to show for it. That figure is exactly what GAP insurance covers.
Worked example
When GAP insurance is worth it
GAP is most worth it on a new or fast-depreciating car bought with little deposit, where the shortfall risk is highest. On an older car or a big-deposit deal, the gap may be small or nil.
If you put down a big deposit or bought a used car that depreciates slowly, the shortfall may be too small to justify the premium.
- New cars: depreciate fastest early on, so the gap can be large in the first few years.
- Low or no deposit: you owe more relative to the car's value, widening the gap.
- Long terms: the balance falls slowly, so the gap stays open longer.
GAP cost vs the risk it covers
Weigh the GAP premium against the shortfall it would cover and the chance of a write-off. A small premium can be worth it if the potential gap is large.
Buy GAP from a standalone provider rather than the dealer if you can, as it usually costs far less for the same cover. Check the policy covers your full finance, including any balloon.
| Situation | Typical shortfall risk | GAP worth considering? |
|---|---|---|
| New car, low deposit | High | Often yes |
| Used car, big deposit | Low | Often no |
| Long term, no deposit | High | Often yes |
GAP, settlement and negative equity
The shortfall GAP covers is closely linked to negative equity, because both come from owing more than the car is worth. Knowing your settlement figure tells you both.
Work out your settlement figure on the settlement calculator, then see whether you are already in negative equity. If you are, the write-off shortfall would likely be larger. Check how much of it your policy would pay, because a return to invoice policy only pays back to the original invoice price, not any extra you owe.
The types of GAP: RTI, RT and VRI
Three common GAP types cover different things: return to invoice, return to value and vehicle replacement. The right one depends on how you bought the car.
Return to Invoice (RTI) pays the gap between the insurer's payout and the original invoice price you paid. Return to Value (RTV) pays back to the car's market value when you took out the policy, which suits a used car bought below a notional value. Vehicle Replacement Insurance (VRI) covers the cost of replacing the car with an equivalent new one, which suits a new car on PCP where replacement cost matters. RTI is the most common and the easiest to compare against your finance. Read each policy's exclusions, because most only pay within a set age or mileage of the car.
| Type | Pays back to | Best for |
|---|---|---|
| RTI (return to invoice) | The original invoice price | New or nearly-new cars |
| RTV (return to value) | The car's value when the policy started | Used cars |
| VRI (vehicle replacement) | The cost of an equivalent new car | New cars on PCP |
Dealer GAP versus standalone
Dealers often sell GAP at the point of sale, but a standalone policy is usually far cheaper for the same cover. Shop both before you sign.
Dealer GAP can cost several hundred pounds, sometimes added to the finance so you pay interest on the premium too. A standalone policy from a specialist insurer often offers the same RTI cover for a fraction of the price. You don't have to buy GAP from the dealer who sells you the car, and you have a 14-day cooling-off period to cancel either way. When a dealer sells GAP with the car, FCA rules stop it completing the sale until at least 2 clear days after it gives you the key policy details, unless you ask to go ahead sooner, and even then not before the next day. If you do buy from a dealer, check whether the premium is being added to the finance, because that raises the total amount payable.
Watch out
When GAP is probably not worth it
On an older car, a big-deposit deal, or a short term, the shortfall may be too small to justify the premium. Run the numbers first.
If you put down 40% or more, or you're two-thirds through a short term, the car is probably worth more than you owe, so a write-off would leave no shortfall and GAP would pay nothing. On a three-year-old used car bought outright with a loan, the gap is usually small. In those cases the premium is better spent on the deposit or an emergency fund. The calculator above shows your shortfall; if it's near zero, GAP isn't earning its premium.
How a GAP claim works
A GAP claim needs the insurer's write-off settlement and your finance settlement figure, and the gap between them is what the policy pays.
GAP pays out only after the motor insurer has settled, and only if there's a positive shortfall. Keep the original invoice, the credit agreement and the insurer's valuation, because the claim depends on the gap between them.
- Tell your motor insurer first and get the formal write-off or theft settlement.
- Get your current settlement figure from the car-finance lender.
- Notify the GAP provider with both figures and the policy number.
- The GAP policy pays the shortfall up to its limit and terms.
- Some policies also cover the motor-insurance excess.
Were you mis-sold finance on this car?
If this car's finance was mis-sold in 2007–2024 through hidden commission, you may be owed redress, which is separate from any GAP claim. It is worth checking separately.
The FCA's redress scheme follows the Supreme Court ruling of 1 August 2025, but parts of it are suspended pending a legal challenge, and payouts are expected in 2027 at the earliest, if the scheme is upheld and the judgment is not appealed. Estimate your position with the compensation estimator. It gives an estimate, not a promise, and you are free to claim yourself.
Were you mis-sold finance or add-ons?
Some car finance from 2007–2024 carried hidden commission, and add-ons like GAP were sometimes mis-sold too. If yours was, you may be owed redress.
The FCA's motor finance redress scheme follows the Supreme Court ruling of 1 August 2025, but parts of it are suspended pending a legal challenge, so lenders do not have to pay compensation yet. Estimate your finance position with the compensation estimator. It gives an estimate, not a promise, and you are free to claim yourself.
Frequently asked
What is GAP insurance?
How does the GAP shortfall work?
Is GAP insurance worth it?
Where should I buy GAP insurance?
Does GAP insurance pay out if I'm in negative equity?
Sources
We cite regulators and official UK sources only.
- FCAfca.org.uk
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