What is Gap Insurance and why should you consider buying Gap insurance for your Kia?
Gap Insurance is really a very simply form of protection, in brief if your Kia is written off it pays the difference between your Kia's valuation on the day it was written off and depending upon the level of cover you chose either simply clears any outstanding finance, protects your invoice price or even the replacement cost.
We at Shortfall.co.uk strongly believe in assisting customers with their understanding of Gap Insurance by using simple, easy to read explanatory information and examples about how Gap Insurance works and how the various levels of protection perform.
In these examples, we use Charlotte and her Kia Picanto, which she paid £10,000.
We know that the majority of our customers first hear about Gap Insurance while at the Kia dealership. Our customers inform us that they were quoted anything in between £399 to as much as £1000. However, at Shortfall.co.uk, we give customers access to a range of policies for as low as £39.99 inclusive of insurance premium tax. All our policies are genuine, tried and tested and are all backed by the financial compensation scheme.
We hope that by reading the examples of Charlotte and her Kia, you will be in the position where you can make well informed decisions about protecting your Kia, but most importantly your finances with Shortfall Insurance.
An estimated 600,000 vehicles are written off each year in the UK alone.
The average vehicle can depreciate by up to 50% in the first three years, including your Kia
Your comprehensive insurer will never pay you the original invoice price you paid for your Kia
What can Vehicle Replacement Insurance do for you and your Kia?
Vehicle Replacement Insurance pays the difference between your Kia's valuation on the day that it was written off and the amount of money that you would need to spend to buy another Kia the same age, mileage and condition as yours was on the day that you collected it from your Kia dealership.
If that model is no longer available then settlement is based on the superseding model.
So, why would you be concerned about protecting the replacement cost surly the invoice price is enough?
Perhaps not. Lets imagine that nothing untoward happened to your Kia and instead in three years time you simply wanted to upgrade it. You would expect to pay a little more. Model upgrades, inflation, labour rates, raw materials all means that chances are that for you to buy another Kia will cost more, so simply being paid the original invoice price is not a guarantee to be able to but another Kia the same as your originally was at least not without using your savings.
This where vehicle replacement can help as instead of simply protecting the invoice price you paid you are now protecting any inflationary or model change increases. So, lets look at what happens to charlotte when her kia is written off and see how her vehicle replacement policy performs.
Charlotte purchases a Kia Picanto for £10,000. Three years later, she is involved in a motoring accident that thankfully leaves her unhurt but her Kia is written off.
She receives £5,250 from her comprehensive insurer, given that this was the market price of his Kia at the time of being wrote off. Without any form of gap insurance and without using saving or taking on extra financial commitments this is the only amount that Charlotte has to be able to replace her kia and or to clear any outstanding finance. To make matters worse kia have just upgraded the Picanto which is now priced at £11,250.
As charlotte had protected her kia with vehicle replacement insurance she would now receive a second payment for £6000. This means that between her two insurance companies she now has the full replacement cost back. If Charlotte paid cash for her Kia then she can spend this money as she sees fit.
if Charlotte had paid for her Kia using a form of finance then she can use the full replacement cost to clear any finance, then the balance of the funds is hers to spend as she wants. Charlotte now has a total Shortfall of £7,500.
Vehicle Replacement will pay this £7,500 and place Charlotte in the position where she can purchase another Kia Picanto if she so wishes.
Did your local Kia Dealership offer you a form of Return to Invoice Gap Insurance?
Return to Invoice Gap Insurance pays the difference between your Kia's valuation on the day it was written off and the original invoice price you paid or the amount still outstanding on finance which ever is the higher. Simply put, if your Kia is written off between your two insurance companies you will be paid the full invoice price you originally paid ( less road tax which you can claim back from DVLA) . From this if you paid cash for your Kia you will now have the full purchase price back are are free to spend the funds as you wish.
If you paid for your Kia using a form of finance then again between your two insurance companies you are paid the full purchase price, from this you can clear any finance and then the balance of the funds, the deposit you have paid, the equity you have made while making your payments is now yours to do with as you see fit.
Lets look at what happens when Charlotte's Kia is written off. Charlotte purchases a Kia Picanto for £10,000. Three years later, she is involved in a motoring accident that thankfully leaves her unhurt but her Kia is written off.
She receives £5,250 from her comprehensive insurer, given that this was the market price of his Kia at the time of being wrote off. Without any form of gap insurance Charlotte only has £5,250 to be able to replace her Kia and or to clear any outstanding finance.
If Charlotte had protected her Kia with a form of Return to Invoice gap insurance then she would now receive a second payment of £4,850. With the second payment from her return to invoice gap insurance policy Charlotte now has the full purchase price back, if she paid for her Kia on finance can use this amount to clear any finance if needs be and the rest of the funds are Charlottes to use as she sees fit.
Charlotte now has a Shortfall/Gap of £5,000 however, Return to Invoice will pay this £5,000 and bridge the Shortfall/Gap that has occurred.
Why do you need to think about protecting your Kia with Finance and Contract Hire Gap Insurance?
Contract Hire Gap insurance pays the difference between your Kia's valuation on the day that it is written off and simply the amount that you have outstanding on your finance agreement. (please note that while out policies are some of the most comprehensive in the UK they will not cover any late payment charges or arrears).
Having your Kia written off is bad enough. Something really traumatic will have happened as either your Kia has been stolen or worse you have been involved in an accident. Either of which can be very stressful and upsetting, however, if you have no form of gap insurance you could also now be left paying for a car that you no longer have.
So, lets look at Charlotte and her Kia Picanto which she purchased on Personal Contract Purchase.
Charlotte buys a new Kia Picanto on a finance package which means that she pays £165 for three years and at the end can pay an optional final payment and the car is hers for ever, she can hand the Kia back or simply walk away.
Two years later, Charlotte awakes to find that her Kia has been stolen. Charlottes motor insurance company send her finance company a settlement payment of £6450 however, her finance company still have an outstanding amount of £2395. Without any form of gap insurance Charlotte is legally responsible for paying this amount. Yes she could use her savings to clear the balance but why?
In this example Charlotte's finance and contract hire gap insurance policy would send a second payment to her finance company for the £2395 meaning that she can walk away with no further liability.
Motor insurance experts claim that the average vehicle can depreciate by up to 50% in the first three years. To put this into context, it is very likely that your Kia may lose half of its original value within the first three years.
As you may already be aware, your comprehensive insurer will only pay you the market value of your Kia at the time it was written off or stolen. If you take into account the above paragraph, this can have an impact to your finances.
We understand that drivers, like yourself who have recently paid a large amount for your Kia do not want to hear about depreciation. However it is important for drivers to have a full understanding of depreciation in order to put into place the relevant protection.
On this page we have put together a number of examples of Kia depreciation. In these examples we have taken figures from 'What Car', who use historical and current data in order to predict what your Kia may be worth in one to four years time.
Example 1 –
Kia Ceed Hatchback 1.4 100 1 5dr
Invoice price you paid - £14,400
Year 1 – £8,353
Year 2 – £6,877
Year 3 – £5,652 – You will see that within the first three years, your Kia Ceed has lost £8,748
Year 4 – £4,827 – You will see that within the first four years, your Kia Ceed has lost £9,573
Example 2 –
Kia Picanto Hatchback 1.11 1 3dr
Invoice price you paid - £8,045
Year 1 – £5,225
Year 2 – £4,300
Year 3 – £3,525 – You will see that within the first three years, your Kia Picanto has lost £4,520
Year 4 – £3,025 – You will see that within the first four years, your Kia Picanto has lost £5,020
Example 3 –
Kia Rio Hatchback 1.4D ISG 3 5dr
Invoice price you paid - £14,895
Year 1 – £9,400
Year 2 – £7,701
Year 3 – £6,275 – You will see that within the first three years, your Kia Rio has lost £8,620
Year 4 – £5,325 – You will see that within the first four years, your Kia Rio has lost £9,570
Example 4 –
Kia Sorento 4x4 2.2 CRDi KX-2 5dr
Invoice price you paid - £28,900
Year 1 – £21,054
Year 2 – £17,302
Year 3 – £14,201 – You will see that within the first three years, your Kia Sorento has lost £14,699
Year 4 – £12,126 – You will see that within the first four years, your Kia Sorento has lost £16,774
Example 5 –
Kia Venga MPV 1.4 CRDi 90 1 Air 5dr
Invoice price you paid - £13,695
Year 1 – £8,450
Year 2 – £6,950
Year 3 – £5,700 – You will see that within the first three years, your Kia Venga has lost £7,995
Year 4 – £4,875 – You will see that within the first four years, your Kia Venga has lost £8,820
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Kia Motors is a South Korean automobile manufacturer founded in 1944. The company is currently South Korea’s second largest manufacturer after Hyundai Motor Company.
The name Kia derives from the Korean proverb ‘to arise to the world from Asia’.
Kia is South Korea’s oldest car company and is based on the outskirts of the capital, Seoul. Originally known as Kyungsung Precision Industry, it began manufacturing steel tubing and bicycle parts and then diversified into the following sectors:
The company introduced Korea’s first bicycle in 1952, motorcycle and 3 wheel truck in 1962 and its first passenger car in 1974.
In 1981, the company was forced to halt production by the then dictator Chun Doo-hwan. However as a result of a partnership with American giant Ford, the company resumed production in 1986 and by 1992, the company had expanded into North America with successful models such as the Pride, 121 and the Avella.
However it was not until the end of the 1990’s when Kia began experiencing serious financial difficulties and would be saved, to the surprise of many by its main competitor Hyundai which would acquire a 50% stake in the struggling company. This stake has however now been reduced, although the two companies remain heavily active with one an other.
The company introduced its ten millionth car in 2002.
The company has three large subsidies including Kia America, Europe and also Kia Defense, in which it manufacturers vehicles for both the South Korean and American militaries.
The company exports on average 1.5 million cars each year and is active in 170 countries with a total workforce of 44,000. A large majority of European police authorities use Kia as its main source of transport.
The company has invested greatly in electric cars such as the Venga and the Pop city models and also in its hybrid range such as Spectra, Soul and Ray models.
The current Kia product portfolio consists of the following successful models: Picanto, Rio, Soul, Venga, Pro Cee’d, Optima, Carens, Sportage, Sorento.