Shortfall Insurance is a supplementary insurance that runs alongside your own motor insurance, to help protect your finances in the event of your car ever being written off.
Your motor insurance, will only ever award you with the amount of money your Smart is valuated on the day it is written off and due to depreciation, this is likely to be less than it was originally worth. This could essentially leave you thousands of pounds out of pocket and in a financially devastating situation.
So, how could Shortfall Gap Insurance aid you and your Smart?
Shortfall Gap Insurance will cover the difference between the valuation of your Smart on the day it is written off or stolen and depending on which type of cover you chooice, the original price you paid for your vehicle (Return to Invoice Gap Insurance), the cost to replace your Smart with the same model, age, mileage and specification as yours was when you drove it away from the showroom (Vehicle Replacement Gap Insurance), or to pay the outstanding balance you have on a finance agreement (Finance and Contract Hire Gap Insurance).
Different levels of Gap Insurance cover work in different ways, to cater to different needs. Explore more about the different types of Gap Insurance for your Smart, Return to Invoice, Vehicle Replacement and Finance and Contract Hire Gap Insurance to see which level of cover best suits you and your specific needs.
Please consider the following facts:
The average vehicle depreciates by around 50% within the first three years.
An estimated 100,000 vehicles were stolen in the UK last year.
An average of 1,600 cars a month were stolen using keys in 2012.
Should you buy Vehicle Replacement for your Smart?
Vehicle Replacement Gap Insurance is designed to protect you against any possible increase in your Smart's invoice price. The invoice price of your Smart may increase, for example if Smart introduce an upgraded version of your model, if the government increase VAT or if the cost certain raw materials increase.
Vehicle Replacement Gap Insurance will pay the difference between your Smart's valuation on the day it is written off or stolen and the amount you need to purchase another Smart of the same age, mileage and condition as your Smart 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 model.
Please see the below example of Jade and her Seat which we hope will help your understanding of Vehicle Replacement Gap Insurance.
Jade purchases a Smart Fortwo for £10,000. Three years later, she awakes to see that her Smart has been stolen. Jade receives a settlement figure of £5,000, given that this was the market value of her Smart at the time it was stolen. Jade finds out that to replace her Smart, she needs an additional £1,000 as the invoice price has increased.
Without any level of Shortfall Gap cover, Jade will have no option but to use her own money, to be able to purchase another vehicle and/or to clear any outstanding finance she may have.
Vehicle Replacement Gap Insurance will pay Jade the further £6,000 needed to purchase the same standard of Smart again. This means that Jade now has the full replacement cost to purchase another Smart vehicle if she wishes, or if necessary to clear any outstanding finance and do with the remaining funds what she sees fit.
Return to Invoice Gap Insurance is designed to return you back to the full invoice price you originally paid for your Smart. It does this by topping up the difference between your motor insurers valuation on the day your car was written off and the amount your Smart was originally worth.
This then leaves you with either the full amount of money to do with as you please, or to clear any outstanding finance you may have and then do with the remaining funds what you see fit.
Please see the below example to assist with your understanding of Return to Invoice Gap Insurance.
Jade purchases a Smart Fortwo for £10,000. Three years later, she awakes to see that her Smart has been stolen. Jade receives a settlement figure of £5,000, given that this was the market value of her Smart at the time it was stolen.
Without any level of Gap Insurance, Jade will have no option but to use her own money to purchase another vehicle and/or clear any outstanding finance.
Return to Invoice Gap Insurance will pay Jade the further £5,000 necessary to return her back to her invoice price, along with her motor insurance. This leaves Jade in the same financial position as she was originally in and able to do with the money what she sees fit, if Jade has any finance to clear she can do this and then do with the remaining funds what she wishes.
Why buy Finance and Contract Hire Gap Insurance for your Smart?
Finance and Contract Hire Gap Insurance is solely designed to allow you to walk away from a finance agreement, without any financial liabilities, in the event of your car being written off or stolen. Finance and Contract Hire Gap Insurance runs alongside your own motor insurance and in the event of your car being written off or stolen will simply clear any outstanding finance that you have on a finance agreement. Leaving you to walk away in the same position as you were in originally.
It is inevitable that cars will depreciate, with the average vehicle depreciating by upto 50% within the first three years of ownership and so it is highly likely that your motor insurer's valuation is going to be a lot less than your car was originally worth. Protecting your car with Finance and Contract Hire Gap Insurance allows you to completely clear your outstanding payments, if the unthinkable was to happen and along with your motor insurance valuation, allows you to move on, in the same financial situation as you were originally.
Please see the example below to help with the understanding of Finance and Contract Hire Gap Insurance:
Jade takes out a four year finance agreement to purchase her Smart. Two years late, Jade is involved in a motoring accident that consequently her Smart is written off. Jade is paid a settlement figure, by her comprehensive insurer which is based on the market value of her Smart at the time it was written off. Jade still has £1,000 left outstanding on her finance agreement.
Without any level of Gap Insurance cover, Jade will have no option but to use her own money to pay off any outstanding finance.
Finance and Contract Hire Gap Insurance will pay the finance company the outstanding £1,000, allowing Jade to walk away from the situation with no financial liabilities.
Every vehicle depreciates, in fact motor insurance experts claim that the average vehicle can depreciate by up to 50% within the first three years. To put this into context, it is very likely that your Smart can lose as much as 50% of its original value by the time it reaches its third birthday.
We believe that it is important to inform drivers about depreciation and how drastic it can be, in order to allow drivers to choose the right form of gap protection for their vehicle.
We have taken a number of figures from 'What Car', who provide historical and current data in order to predict what your Smart can be worth in one, two, three and four years time to give you an idea about how cars depreciate.
Example 1 –
Smart Fortwo Coupe 1.0 84 Passion 2dr
Invoice price you paid - £10,875
Year 1 – £6,823
Year 2 – £5,590
Year 3 – £4,450 – You will see that within the first three years, your Fortwo model has lost £6,425
Year 4 – £3,621 – You will see that within the first four years, your Fortwo model has lost £7,254
Example 2 –
Smart Fortwo Coupe 1.0 70 mhd Pulse 2dr
Invoice price you paid - £9,575
Year 1 – £6,216
Year 2 – £5,078
Year 3 – £4,126 – You will see that within the first three years, your Coupe model has lost £5,449
Year 4 – £3,621 – You will see that within the first four years, your Coupe model has lost £6,269
Example 3 –
Smart Fortwo Cabriolet 1.0 70 mhd Passion 2dr
Invoice price you paid - £11,875
Year 1 – £7,933
Year 2 – £6,486
Year 3 – £5,289 – You will see that within the first three years, your Fortwo Cabriolet has lost £6,586
Year 4 – £4,241 – You will see that within the first four years, your Fortwo Cabriolet has lost £7,634
Smart continue sales of the ForTwo model.
Smart is an automobile marquee of Daimler AG, which was founded in 1994. The history of Smart dates back to the late 1980’s when Nicolas Hayek, the CEO of the Swatch Watch Company set out to design and manufacture a small, stylish, affordable city car.
This proposal became known as ‘Swatchmobile’. However considering Mr Hayek was new to the automobile industry, he did not feel confident enough to take on the challenge alone, and so he searched for the backing of a well-established automobile company.
Mr Hayek approached Volkswagen, Fiat and BMW, who all would decline his proposal. Eventually Mr Hayek got in contact with Daimler-Benz AG who would accept his proposal. The name of the project was changed to Smart and the company opened its manufacturing facility in France, which was known as Smartville. The company introduced its first model, the Smart City Coupe in 1998. The model was a great success and firmly established the Smart name.
By the end of the 1990's, the company began to expand its operations throughout the world in countries such as Japan, China, Hong Kong, Indonesia, America, Canada, Mexico, Argentina, Australia and the UK. During this time, Daimler-Benz AG would buy out Mr Hayek’s remaining stake. The company is said to be investing greatly in its electric car line. In 2007 it introduced a micro hybrid drive version of the successful model, the Fortwo. The current Smart portfolio consists of the following successful models: City, Crossblade, City-Cabrio, K, Roadster, Forfour, Fortwo, Fortwo ED.