A friend of mine has had her car stolen, a Fiat 500. I'm not sure of the full details as she lives in London, but she's only had it a couple of months and it's around two years old and was bought on finance.
She's worried that the insurance won't cover the outstanding balance, but I have it in the back of my mind that I once read somewhere that finance companies have an agreement with the insurance industry where the latter will cough up the full amount owing irrespective of the car's value.
Have I got that right, or not?
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I think that's what GAP insurance is aimed at isn't it? Plugging the gap between an insurance payout and the amount owned on finance (or invoice price in the case of Return To Invoice cover). I can't imagine insurers paying out more than absolutely necessary unless the appropriate cover was in place?
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GAP insurance is exactly for this type of situation. There may be more more owing on the finance than the insurance will pay.
However, one would hope that with a two year old car, it's done the heavy depreciation as taking it away as a new car is the biggest loss, and then it progressively gets less. If she didn't pay too much for it, and I guess there was a deposit, and she has paid two months payments, the sum owing on the loan may not exceed the insurance payout.
Best to get a selection of dealer prices now, and tell her to regard the first offer as an opening point for negotiation, and not be too surprised if the offer is increased when one queries, fairly normal practice I believe.
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No, I think you have not.
It would be normal for an Insurance Company to pay the sum of money required to replace the vehicle with another vehicle as close as possible. In the case of a nearly new vehicle, and I mean really *nearly* some insurance policies will replace it with another new vehicle; which is obviously not the case here.
There is no standard cover that I am aware of that would cover the higher amount required to cover finance charges as well.
I do hope she has GAP insurance of some description.
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Thanks both of you, I'll find out.
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The insurer should put her back in the same position as she was in before so unless she paid way over market value for it she should get back what she paid less the deperciation over that period less and excess.
All a bit ideal world though because I'm sure that they will offer trade part ex and she will have to argue the case..
I think the bit you may have miss understood is that the insurer will pay the claim direct to the finance company as the car will have been secured against the finance.
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Financial Ombudsman has this to say: "In most cases, we assess the market value as the retail price which the consumer would have had to pay for a comparable vehicle at a reputable dealer, immediately before the date of the damage or theft." Link: tinyurl.com/b5d2y2h
ABI says much the same.
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