Would a payout cover what you still owe?
If your car were written off tomorrow, the insurer pays what the car is worth. The bank wants what you borrowed. Those are rarely the same number.
Its retail value. Your policy schedule or a dealer site will give you this.
The settlement figure from your bank, not the monthly instalment.
What you pay towards a claim before the insurer pays anything.
Why three answers?
Your policy pays out on one of three valuations, and which one is a single line on your schedule. Most people have never looked, and assume the most generous of the three.
If you do not know which you are on, plan around trade.
Put in what the car is worth and what you still owe. You will get three answers, because your insurer could pay any one of them.
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An estimate, not a quote and not advice. Market and trade are shown as a share of retail to illustrate the difference between the three bases. A real valuation depends on the model, mileage and condition, and your insurer uses its own book. Your policy schedule says which basis you are on. Our other tools.
Why a gap happens at all
The car falls faster than the loan
A new car loses a chunk of its value the day you drive it out. Your loan does not. For the first couple of years the two lines are often far apart.
The excess comes off first
The insurer subtracts your excess before anything reaches the bank. A bigger excess lowers your premium and widens this gap at the same time.
Retail, market or trade
Policies pay out on one of three valuations, and trade is meaningfully less than retail on the same car. Most people have never checked which one they bought.
What you can actually do about it
- Check your basis. If your schedule says trade and you assumed retail, that is the cheapest thing to fix. Ask what retail would cost.
- Consider gap cover. Sometimes called credit shortfall cover. It pays the difference, and it is usually inexpensive relative to what it covers.
- Recheck yearly. The gap is widest early and closes over time. It is worth knowing which side of that you are on.
This is general information, not advice about your policy. What your insurer would actually pay depends on your schedule and their valuation.
Found a gap?
Ask for quotes and tell them what you found. You choose which insurers get your details.