What are your Shortfall Gap options for PCP Finance?
The Personal Contract Purchase plan, or PCP Finance package is one of the most popular ways to secure a brand new car in 2013. In fact it is safe to assume that thousands of new 13 plate cars are awaiting collection on March 1st that are linked to this method of finance.
The rise of the PCP agreement
When the Personal Contract Purchase was first developed, it is unlikely that motor finance houses could have known how popular they would have become. Ford Options, Peugeot Passport and Citroen Elect 3 have all been popular choices for consumers in the past. The 3 basic options of part exchange, hand back or buy the vehicle all give the consumer lots of choices at the end of the agreement. However the financial protection afforded by Gap Insurance is still as appropriate as it would be for any other style of hire purchase agreement. This means that consumers looking to protect any potential shortfall are faced with three options.
Shortfall Gap choices for PCP agreement
Finance Shortfall Gap : to pay the shortfall between the market value of the vehicle and the outstanding finance settlement. This may be useful if you have only a small deposit in the PCP agreement. Combined Return to Invoice : to cover the difference between the market value and the original invoice price. This is often provided by motor dealers, and can protect any deposit you have put down on the finance agreement, Combined Vehicle Replacement Insurance : will cover the shortfall between the vehicle market value and the cost of replacing the vehicle with the equivalent new model (if the vehicle was originally brand new). Ideal if you have a great deal on the vehicle, and the likely cost of replacing the vehicle goes up.
Shortfall Gap Insurance options are available for the duration of the PCP agreement. However, if you intend to keep the vehicle at the end, then you could initially buy a Gap product for a longer period. Motor dealers tend to offer a maximum of three year cover, whereas if you buy gap insurance direct from a specialist broker, then you can get anything up to 5 years.