What can Shortfall Gap Insurance do for your Lexus?
In a nutshell, Shortfall Gap Insurance can pay you the difference between your comprehensive insurers settlement payment, which will be the market value of your Lexus at the time it was written off or stolen and depending on the type of cover you chose and make sure that you do not end up out of pocket.
You can protect the original invoice price you paid for your Lexus (Return to Invoice Gap Insurance), clear any outstanding finance you may have on a finance agreement you have in place in order to purchase your Lexus (Finance and Contract Hire Gap Insurance) , or pay the relevant replacement costs you need in order to purchase a Lexus of the same age, mileage and condition as your original Lexus was when you first drove it out of the show room(Vehicle Replacement Insurance).
This page has been designed to aid you with your understanding of Shortfall Insurance and to help you recognise its true importance to your finances.
On this page you will find three examples of the three forms of Gap Insurance: Return to Invoice, Vehicle Replacement and Contract Hire/Finance Gap. In these examples we use Norah and her Lexus GS.
At Shortfall.co.uk, we give customers access to policies for as low as £39.99 inclusive of insurance premium tax. All our policies are genuine, tried and tested and subject to a range of awards for both cost and quality, they are all our policies are protected by the financial compensation scheme.
Before you read the examples, please consider the following facts:
In the UK each year, an estimated 600,000 vehicles are written off
The average vehicle can depreciate by up to 50% in the first three years, including your Lexus
Your comprehensive insurer will only pay you the market value of your Lexus at the time it is written off or stolen
Your Shortfall Insurance provider will not reimburse you your Lexus's road tax as this can be claimed back from the DVLA
What can Vehicle Replacement Gap Insurance do for your Lexus?
Vehicle Replacement Shortfall Insurance pays the difference between your comprehensive insurers payments, which will be the market value of your Lexus at the time it was written off and the amount you now need to purchase another Lexus of the same age, mileage and condition as yours originally was when you first drove it out of the show room. If your original model is no longer available, then you will be paid the relevant funds to purchase the superseding Lexus model.
Vehicle replacement is in many ways almost like return to invoice gap insurance but it has one very big advantage in that instead of simply just protecting the deprecation of your Lexus it is also protecting the appreciation of the cost of a replacement.
It is a sad fact of life that vehicles lose value of time. Equally just as your Lexus is losing value the cost of a replacement is increasing, manufacture upgrades, inflation, safety improvement even raw materials all means that even if nothing happened to your Lexus and you wanted to change it in perhaps three of four years time you would not be surprised to pay more.
This means that simply getting back your invoice price is not a guarantee to be able to buy another Lexus the same age, mileage and specification as yours was, at least not without potentially using your savings and this is exactly where vehicle replacement insurance can help.
Lets look at Norah and see what happens when her Lexus is written off and how her vehicle replacement policy performs.
Norah purchases a Lexus GS for £30,000. Three years later, she awakes to find it is no longer on the drive way. Norah receives a settlement payment by her comprehensive insurer of £15,000 as this was the market value of her Lexus at the time it was written off or stolen. To compound the issue Norah contacts her local Lexus dealership who inform her that the invoice price of her Lexus model has increased by £2,500 to £32,500.
Without any form of Gap protection, Norah may be forced to use her own personal savings or even take on extra financial commitments in order to purchase another Lexus and or clear any finance still outstanding.
Vehicle Replacement Gap Insurance will pay the difference between Norah's Lexus's valuation on the day it was written off and the amount that she would need to spend to buy another. In this example Norah would receive a second cheque for £17,500. Norah now has the full replacement cost which she can (after clearing any finance ) spend as she sees fit.
What can Return to Invoice Shortfall Insurance do for your Lexus?
Return to Invoice will simply, if in the unfortunate case your Lexus is written off or stolen, pay you the difference between your comprehensive insurers settlement payment, which will be the market value of your Lexus at the time it was written off or stolen and the original invoice price you paid for your Lexus. (less your road fund which you can claim back from DVLA)
All outstanding finance will be cleared and any money left over (the deposit you have paid and any equity you generated while making your payments) is yours to do as you see fit.
Lets look at Norah and how her Return to Invoice Gap Insurance policy performs when her Lexus is written off.
Norah purchases a Lexus GS for £30,000. Three years later, she awakes to find it is no longer on the drive way. Norah receives a settlement payment of £15,000 from her comprehensive insurer. Without any form of Gap Insurance cover, Norah may be forced to use her own personal savings to be able to purchase another vehicle or clear any outstanding finance.
However, given that Norah was protected by Return to Invoice Shortfall Insurance, Norah will be paid a second payment of £15,000 which will return her to the invoice price she originally paid for her Lexus. She now has the full purchase price back and can spend this as she sees fit.
If Norah was paying for her Lexus through a form of finance agreement, she will be expected to clear any outstanding finance she may be liable for and any money left over is hers to do as she see's fit.
What can Contract Hire Gap Insurance do for your Lexus?
Contract Hire (or Finance Gap) Shortfall Insurance can pay you the difference between what you receive from your comprehensive insurer, which will be the market value of your Lexus at the time it is written off or stolen and the total amount you have outstanding on your finance agreement.
This policy is simply designed to allow you to walk away from any finance agreement without any financial liability.
Norah takes out a four year finance agreement to purchase her Lexus. Two years later, Norah awakes to find that her Lexus is no longer on her drive way. Norah's insurance company send her finance company the market value of her Lexus.
However, even after Norah's insurance companies settlement there is still an outstanding finance amount of £6750. Without any form of gap insurance Norah is still legally bound to honour this amount. She is now left in the terrible position of having no Lexus to use and having to spend what ever savings she may clear clearing finance on a car she no longer has.
Contract Hire Gap Insurance would pay the difference between Norah's Lexus valuation on the day it was written off and the amount that she had outstanding on finance. In this example Norah's finance and contract hire gap insurance policy would send a second payment to her finance company for £6750. Please note that Norah's policy would not cover the cost of any late payment charges or arrears.
We at Shortfall.co.uk understand that drivers simply do not want to hear about depreciation. This is because you will have just paid a large sum for your Lexus and then you are told that a large percentage of this sum will be lost within a certain time frame.
However, we belive that it is important to make drivers aware of Lexus depreciation in order to allow them to make the right decisions about protecting their finances with Shortfall Gap Insurance.
Did you know that the average vehicle can depreciate by up to 50% in the first three years? In other words, your Lexus can lose half of its original value by the time it reaches its third birthday.
Given that you will only ever be paid what your Lexus is worth at the time it is written off or stolen by your comprehensive insurer, this sum can be considerably less than what you originally paid. This to no surprise can have serious consequences to your finances.
We have taken figures from 'What Car', who use historical and past data to predict what your Lexus will be worth in one, two, three and four years time and provided you with a number of examples in order to assist your understanding.
Example 1 –
Lexus IS Saloon 250 2.5 F-Sport 4dr
Invoice price you paid - £30,495
Year 1 – £18,108
Year 2 – £14,900
Year 3 – £12,241 – You will see that within the first three years, your IS model has lost £18,254
Year 4 – £10,435 – You will see that within the first four years, your IS model has lost £20,060
Example 2 –
Lexus GS Saloon 250 F Sport 4dr
Invoice price you paid - £39,995
Year 1 – £21,525
Year 2 – £17,850
Year 3 – £14,850 – You will see that within the first three years, your GS model has lost £25,145
Year 4 – £12,874 – You will see that within the first four years, your GS model has lost £27,121
Example 3 –
Lexus GS Saloon 250 Luxury
Invoice price you paid - £35,995
Year 1 – £20,326
Year 2 – £16,874
Year 3 – £14,049 – You will see that within the first three years, your GS model has lost £21,946
Year 4 – £12,148 – You will see that within the first four years, your GS model has lost £23,847
Example 4 –
Lexus IS Saloon 5.0 V8 F (LSD) 4dr
Invoice price you paid - £58,416
Year 1 – £31,663
Year 2 – £25,902
Year 3 – £21,902 – You will see that within the first three years, your IS model has lost £36,514
Year 4 – £16,833 – You will see that within the first four years, your IS model has lost £41,583
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Founded in 1989, Lexus is the luxury division of the Japanese automaker giant, Toyota Motor Corporation, which is the largest automaker in the world. In the 1980's, the senior management of Toyota aimed to enter the luxury vehicle market to counter the dominace of the United States.
The famous story reads: Several of Toyota’s most senior managers rented a house at Laguna Beach, a wealthy area in California. The aim was to observe their eventual target market, upper class Americans. Toyota would design its prototype model around these people's needs. After a total of $1 billion spent on research and design, Lexus was formed with the introduction of the LS 400 model. It was money well spent as the 400 was a hit in America, when it first entered the market in 1989.
After the success of the LS 400, Lexus introduced the GS -line, the second generation of the LS 400, again both to great success. The company became the largest luxury car maker in the United States by 1999. The company is also currently investing greatly in its hybrid vehicle portfolio. It is also investing in additional security and safety features for its vehicles such as: facial recognition that monitors the driver’s attentiveness and also rear pre-collision whiplash protection.
Lexus is also very active in motor racing. The company is advertised by legendary athletes such as Andy Roddick, Annika Sorenstam and Peter Jacobsen. The current Lexus portfolio consist of successful brands such as: CT, IS, GS, RX and LS.