CONCERNS have been raised that consumers are too focused on getting the cheapest car lease and aren’t considering the financial risks they may face if their new car is written off in an accident or stolen.
Popular budget SUVs such as the Jaecoo 7 and Chery Tiggo 7 are available to lease for as little as £251 and £184 per month respectively with Leasing.com, while a small hatchback like the Leapmotor T03 is just £115p/m and the BYD Dolphin Surf is only £157p/m.
But consumers need to think beyond the headline price and consider how rapidly all new cars depreciate – or they could face a hefty bill if their car is written off.
“Within the first six months of a mainstream new vehicle’s life, used car trade-in values show that a car can lose anywhere between 15% and 50% of its original list price, depending on the model. This equates to thousands of pounds.”
He continued: “For example, a Ford Puma with 5,000 miles, loses circa £9,000, a Jaecoo 7 a similar figure. An Astra EV can lose up to £16,000, or half of its value.
These figures are based on actual list prices, not necessarily new car transaction prices, as we appreciate consumers can receive considerable upfront discounts.”
Why the insurance payout might fall short of the car’s new value
If a new car is written off, the consumer may be reliant on the pay out from their insurance company to cover the rest of their monthly car finance payments. But this might not be enough as the pay out will typically be the car’s current market value, not its original value.
“The new car market is full of great deals at the moment, particularly from Chinese car brands. But we’re concerned that consumers are rushing to secure the cheapest leases without a financial safety net should their new car be written-off.”
To get the cheapest deals, consumers may be paying nine to 12 months initial rental but if their new lease car is written-off that’s money they are unlikely to get back.
They are also still liable for the remaining lease payments and they’ll need to find themselves a new car.
How brokers can help consumers avoid the loss risk
“People assume their car insurance will cover these costs but they’ll typically only receive a payout for the car’s current market value, which may be lower than when they took out the lease,” says Robert.
“Leasing brokers have an opportunity to help mitigate that risk for consumers by offering them GAP (Guaranteed Asset Protection) insurance, which can include both initial rental protection and cover the remaining lease payments.”
Premia Solutions’ online platform, Look After My Car, gives leasing broker customers exclusive offers on a range of insurance products and services specifically designed for drivers of leased vehicles.
Membership is free for a broker’s customers and that gives them GAP insurance free for three months, ensuring customers have essential protection during the highest-risk period of their lease to cover the difference between the insurance pay out and the outstanding finance, if the vehicle is written off or stolen.
At the end of the free of charge period, customers are given the option to upgrade to full GAP cover, which can include:
- Up to £5,000 initial rental protection
- Up to £500 excess contribution
- Up to £500 excess contribution even if the vehicle isn’t written off.
- £500 inconvenience payment
- A courtesy car for up to 30 days
“Even if a customer chooses not to upgrade, they still benefit from having had protection in place during the most vulnerable early months of their lease,” says Robert.
How can leasing brokers make Look After My Car available to their customers?
It’s really easy, simply give Robert Sleat, Head of Leasing Brokers and Telesales, a call on 07708 480899 or email robert.sleat@premiasolutions.com. Robert is happy to have a chat to discuss any questions a broker may have and whether it would work for them.
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Sarah Tooze has been an automotive journalist for more than 15 years, specialising in the fleet and transport sectors. She has held senior positions at industry-leading B2B titles Fleet News and Smart Transport, and led campaigns championing motorists as consumer editor for online used car marketplace Heycar and motoring advice website HonestJohn.co.uk. In 2017 she won the Newspress Automotive Business Journalist award.
