Are Main Dealerships Really Trying to Rip you Off with Gap Insurance?

Is a Gap Insurance Market Value Clause Important?

Type gap insurance into the Internet or search for bogs and you will find thousands of comments and answers all trying in their own unique and sometimes not so subtle way to blame dealerships for the reasons that their levels of gap insurance are so much higher in price than online suppliers.

Now as you know we are sponsored by an on line gap insurance supplier so it would be easy for us to simply agree. But that is not the truth and at Aequitas all we ever want is to give the general public all the facts and let them make their own mind up. Sometimes this means highlighting and issue that left alone could make our life easier.

It would be all too easy to let you the general public continue to think that it is all the big bad dealerships fault and that they are simply trying to as one blogger put it “stealer’s just rip you off ” but this is not true. After all how can you make informed choices if you do not know all the facts good and bad.

There are in fact three main reasons that your dealership will never be able to offer gap insurance as competitively priced as on line suppliers and it has nothing to do with levels of service, quality of cover, back or claims handling.

In fact two of the three reasons are completely beyond their control.

  1. If you buy gap insurance directly from the dealership or finance company who is supplying your vehicle they are legally bound to charge you insurance premium tax at a much higher rate.
  2. You local dealership will only be able to provide policies for customers who buy vehicles from from. This means that in most cases some of the top gap insurance suppliers could provide the equivalent of a years worth of gap insurance policies in a matter of days. Gap insurance is just like any other business volume matters and helps to drive down prices. After all if you where buying 100 cars you would expect a lower price per car wouldn’t you? Well this is exactly the same with gap insurance.
  3. Commission !!!!! This is possibly the most difficult to explain. Yes your dealership is a business, just like on line gap insurance suppliers. Yes your dealership will earn money from you buying the policy just like on line gap insurance suppliers. The difference in most cases instead simply comes down to volume. On line suppliers will provide thousands of polices for tiny margins, main dealerships will provide tiny amounts in comparison but with much larger margins.

So is your main dealership really trying to rip you off with gap insurance, no we don’t think so it is just that in most cases it would be impossible for them to compete.

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