What can Shortfall Gap Insurance do to help protect your Mercedes?
In a nutshell, Gap Insurance can pay you, the difference between your comprehensive insurers settlement payment, which will be the market value of your Mercedes at the time it was written off or stolen and make sure that you do not end up having to cope with any financial implications.
Depending upon the level of cover you chose you can protect the difference between your Mercedes value and the amount of money you need to either: return you back to the original invoice price you paid for your Mercedes (Return to Invoice), purchase another Mercedes of the same age, mileage and condition as your original Mercedes was at the time it was first drove out of the show room (Vehicle Replacement) or clear all outstanding balance on your finance agreement (Finance and Contract Hire).
This page has been designed to assist you with your understanding of Shortfall Insurance. We have put together three examples of the three forms of Gap Insurance available for you to choose from: Return to Invoice, Vehicle Replacement and Contract Hire/Finance Gap. In these examples we use Connor and his Mercedes.
Before you read the examples, please consider the following facts:
In the UK each year, 600,000 vehicles are written off.
The average vehicle can depreciate by up to 50% in the first three years, including your Mercedes.
Your comprehensive insurer will only ever pay you the market value of your Mercedes at the time it was written off or stolen.
What can Vehicle Replacement Gap Insurance do for your Mercedes?
Vehicle Replacement Shortfall Gap Insurance will pay you, the difference between your Mercedes valuation on the day it is written off or stolen, which you will be paid by your comprehensive insurer and the amount of money you need to purchase another Mercedes of the same age, mileage and condition as your original Mercedes was when you first drove it out of the show room.
If that model is no longer available or if Mercedes have upgraded the model then settlement would be based on the cost of the superseding model.
Please take a look at the example of Connor and his Mercedes which we have designed in other to demonstrate how important Vehicle Replacement is to your Mercedes:
Connor purchases a Mercedes E-Class for £45,000. Three years later, Connor awakes to find that his Mercedes has been stolen. Connor is paid £22,500 by his comprehensive insurer, as this was the market value of his Mercedes at the time it was stolen.
To make matters worse, Connor is informed by his local Mercedes dealership that the cost to replace his Mercedes E-Class has increased by £5,000, from £45,000 to £50,000. Without any level of Shortfall cover, Connor will have no choice but to use his hard earned savings or take on extra financial commitments to purchase another Mercedes or to pay off any outstanding finance.
Vehicle Replacement Gap Insurance will pay Connor a second settlement payment of £27,500. If Connor paid for his Mercedes with cash or a bank loan he now has the full replacement cost back.
If Connor bought his Mercedes on a form of finance, then the Vehicle Replacement Gap Insurance will clear any outstanding finance, if necessary and the balance of the funds, the deposit he paid, the equity he accrued while making any payments, as well as any model or inflation price changes and increases is his to spend as see he sees fit.
If the original Mercedes E-Class model is no longer available, then Connor will be paid the relevant funds to purchase the superseding model.
What level of protection can Return to Invoice Shortfall Insurance provide for your Mercedes?
Return to Invoice will pay you the difference between your comprehensive insurers settlement payment, which will be the market value of your Mercedes at the time it was written off or stolen and the original invoice price you paid for your Mercedes.
If you are paying for your Mercedes through a form of finance agreement, you will be expected to clear any outstanding finance that you may have, the balance of the funds, the deposit you have paid and the equity you have generated is yours to spend however you see fit.
Please take a look at the example below of Connor and his Mercedes which we have designed to demonstrate to you the importance of Return to Invoice Shortfall Gap Insurance:
Connor purchases a Mercedes E-Class for £40,000. Three years later, it is written off as a result of a motoring accident. Connor receives a settlement payment of £20,000 from his comprehensive insurer given that this was the market value of his Mercedes at the time of the accident. Without any form of Gap protection, Connor will have no choice but to use his own savings or even take on extra financial commitments to purchase another Mercedes and/or to pay off any outstanding finance that he may have.
With a Return to Invoice Gap Insurance policy Connor would receive a second payment of £20,000 which means that he now has the full invoice price he paid back, as previously explained, if Connor had a finance agreement in place, he would be expected to pay off any outstanding balance and any funds left over is his to spend however he see's fit.
The example above has been designed to illustrate the possible rates of depreciation for your Mercedes model as well as showing the possible shortfall and gap between the market value of your Mercedes model and the original invoice price of which you paid for the vehicle. So, why not protect yourself with a Shortfall Return to Invoice Gap Insurance policy for your Mercedes today and click here for an instant quotation or call on 0800 195 4926.
Why should you buy Contract Hire Gap Insurance for your Mercedes?
Contract Hire Shortfall Gap Insurance (also known as Finance Gap) is designed to make sure that should the worst happen and your Mercedes be written off that you can walk away from your old finance agreement without any financial liabilities.
Simply put finance and contract hire gap insurance will pay the difference between your Mercedes valuation on the day it is written off or stolen and the total amount you have outstanding on your finance. - Please note that this policy will not cover any late payment charges or arrears.
Please see the example which we have designed below to assist your with your understanding of how Contract Hire Gap Insurance can protect you and your Mercedes:
Connor takes out a four year finance agreement. During the third year, Connor is involved in a motoring accident that unfortunately writes off his Mercedes. Connor receives a settlement payment from his comprehensive insurer, which is based on what his Mercedes was worth at the time it was written off or stolen. However, even after this settlement payment has been paid, there is still £5,000 remaining on the finance agreement which technically Connor is still legally liable for.
Without any form of Gap Insurance protection, Connor will have no option but to use his own savings or even take on extra financial commitments to pay off this outstanding £5,000.
Contract Hire Gap Insurance will pay Connor's finance company the outstanding £5,000, which as explained above, is the difference between the Mercedes valuation on the day it is written off and the total amount outstanding.
Because of Contract Hire Gap cover, Connor is now in the position to walk away from the finance agreement without any financial liabilities to his name. Yes Connor still has no Mercedes and yes he will have to find another deposit or advanced rentals but thankfully he is now not left in the terrible position of having to pay for a Mercedes he no longer has.
You may already be aware that if in the unfortunate case your Mercedes is written off or stolen, your comprehensive insurer will only ever pay you the market value of your Mercedes at the time it was written off or stolen. This can be considerably less than what you originally paid.
This is because industry experts claim that the average vehicle can depreciate by up to 50% within the first three years. In other words, it is very possible that your Mercedes may lose as much as half of its original value within the first three years of ownership.
We at Shortfall.co.uk understand that no driver wants to hear about depreciation, no one wants to pay a large amount for a Mercedes and then be told that they will lose half of this sum in three years time.
However, it is important for drivers to be aware of Mercedes depreciation in order to put into place the relevant protection, like Gap Insurance!
To assist you with your understanding, we have put together a number of examples of Mercedes depreciation. In these examples we have taken figures from 'What Car', who provide historical and current data in order to predict what your Mercedes can be worth in one, two, three and four years time.
Example 1 –
Mercedes-Benz CL Coupe CL63 AMG 2dr
Invoice price you paid - £118,840
Year 1 – £59,848
Year 2 – £49,224
Year 3 – £40,406 – You will see that within the first three years, your CL model has lost £78,434
Year 4 – £34,499 – You will see that within the first four years, your CL model has lost £84,341
Example 2 –
Mercedes-Benz CLS Shooting Brake 63 AMG 5dr
Invoice price you paid - £83,055
Year 1 – £58,977
Year 2 – £48,953
Year 3 – £40,672 – You will see that within the first three years, your CL S model has lost £42,383
Year 4 – £35,224 – You will see that within the first four years, your CL S model has lost £47,831
Example 3 –
Mercedes-Benz E Class Cabriolet E220 CDI BlueEFF SE 2dr
Invoice price you paid - £36,490
Year 1 – £36,490
Year 2 – £26,729
Year 3 – £22,069 – You will see that within the first three years, your E class model has lost £14,421
Year 4 – £14,738 – You will see that within the first four years, your E class model has lost £21,752
Example 4 –
Mercedes-Benz S-Class S500L 4dr
Invoice price you paid - £83,405
Year 1 – £42,887
Year 2 – £35,255
Year 3 – £28,958 – You will see that within the first three years, your S-Class has lost £54,447
Year 4 – £24,730 – You will see that within the first four years, your S-Class has lost £58,675
Example 5 –
Mercedes-Benz Viano MPV 3.0 CDI Ambiente 5dr
Invoice price you paid - £39,930
Year 1 – £29,448
Year 2 – £24,226
Year 3 – £19,901 – You will see that within the first three years, your Viano model has lost £20,029
Year 4 – £16,974 – You will see that within the first four years, your Viano model has lost £22,956
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Mercedes-Benz is a German automobile manufacturer, which was officially founded in 1926. The company is part of the ‘Big 3 German luxury automakers’, along with Audi and BMW. The history of Mercedes-Benz dates back to two men, Karl Benz and Gottlieb Daimler, who are both responsible for laying down the foundations for the modern-day motorization of road transport.
The two men entered the industry independent from one another. Karl Benz founded the Benz & Cie Company in 1883 and Gottlieb Daimler founded the Daimler-Motoren-Gensellschaft Company (DMG) in 1890. The two companies merged in 1926 and formed Daimler-Benz AG.
The name Mercedes dates back to Emil Jellinek, who was a well-known Austrian businessman. Emil met with Gottlieb in 1897 and bought a Daimler car and soon became good friends. This allowed Gottlieb to take advantage of Emil’s vast network of contacts of European aristocrats and entrepreneurs, which significantly increased demand for Daimler cars.
Emil began to successfully enter Daimler cars in racing car competitions. The cars would race under the name Daimler-Mercedes. Mercedes was the name of Emil’s daughter and is the Spanish word for Grace. DMG would officially register Mercedes as its brand name in 1902.
As a result of the First World War, both DMG and Benz & Cie began to experience financial difficulties. In 1926, the two companies merged and officially formed the Daimler-Benz Company, which would become known throughout the world as Mercedes-Benz.
The famous Mercedes three-pointed star logo represents the company’s ability to manufacture engines for land, sea and air use. The company has a vast network of operations throughout the world. Its best markets are in Germany, America, China and Europe. As of 2011, the company has a total workforce of 98,000.The current model portfolio consists of the following successful models: A, B, C, CL, CLS, E, G, GL, M, R, S, SL, SLK classes, SLS AMG, Viano and the AMG.