AutoProtect Group has highlighted the potential importance of offering GAP insurance to electric vehicle customers due how value drops for some models could expose customers in the event of a write-off.
GAP insurance is typically sold alongside car finance and covers the difference between a vehicle’s purchase price or outstanding finance and its current market value, in the event it is written off before finance has been repaid.
In March, What Car published its top 10 fastest-depreciating cars to establish which cars lost the most significant percentage of their new value over a typical ownership period of three years or 36,000 miles.
This list points strongly to the future need for GAP insurance because mitigating the pain of depreciation in the event of a write-off is at the heart of GAP’s value.
The top 10 included five EVs, three hybrid cars, and two petrol cars, including BMW, Audi, Vauxhall, DS, Lexus, Jeep, Mazda and Peugeot models.
The list saw cars retain from just 28.6% to 33.1% of their original value.
EVs’ dominance on What Car’s fastest depreciation car list was echoed by eight EVs featured in a similar list published by Car Buyer.
With heavy discounting seen last year as manufacturers sought to achieve their Zero-Emission Vehicle (ZEV) targets, despite recent tweaks, AutoProtect believes it likely EVs will feature prominently in lists to come.
Dean Connolly, AutoProtect Group director of strategic partnerships (pictured), said the residual value performance for EVs should further strengthens the value proposition for GAP insurance, which is once again available in dealer showrooms;
He said: “EVs, like any new technology, tend to depreciate quickly as the pace of innovation accelerates.
“Newer tech, better batteries and arguably greater popular appeal are all factors that have been accelerated by extensive ZEV-related discounting.
“The implications could be financially painful if an EV is written off and the owner does not have GAP insurance.
“With GAP back in showrooms, dealers can help their customers manage the risk with the new GAP sales affordability model, focusing on good customer outcomes, where the cost/benefit can create a compelling customer offer.”
Many dealerships across the UK are not offering GAP insurance following the Financial Conduct Authority’s (FCA) review into the product last year to make sure it was representing fair value for customers.
However, the FCA gave the greenlight to resume GAP sales almost a year ago after its review.