Leasing changes the shape of a total loss claim, because you never owned the vehicle in the first place. That single fact rearranges who gets paid, who is still liable, and what you are left with.
What happens when a leased vehicle is written off
Your motor insurer settles at the vehicle’s market value on the day of the loss. That payment goes to the leasing company, because the leasing company owns the car.
The leasing company then applies an early termination charge, which represents what it expected to receive across the remainder of the agreement. If the insurance settlement does not cover that figure, the difference is yours to pay.
You are then in the position of owing money on a vehicle that no longer exists, with no deposit back and nothing towards a replacement.
What Lease GAP does
Lease GAP is built around that early termination charge rather than around a purchase price or a finance balance, which is why it is a distinct product rather than a variation on the other two.
It covers the shortfall between what the motor insurer paid and what the leasing company is owed, so the agreement is settled and you walk away without a debt.
What it does not cover
This is the part worth reading carefully, because it is where expectations go wrong.
Lease GAP does not pay end-of-contract damage charges. Those arise when a vehicle is handed back in the ordinary way and assessed against fair wear and tear standards, which is a different situation entirely from a total loss.
It also does not cover excess mileage charges, outstanding arrears on the agreement, or anything deducted for a condition that existed before the policy started.
Cosmetic damage and kerbed wheels, which are the usual reasons for handback charges, are dealt with by separate products such as SMART and Tyre & Alloy cover.
Two things to check before buying
Some lease agreements already include a form of GAP cover arranged by the leasing company. Check before you buy, because there is no benefit in holding it twice.
Check also that the policy is written for a lease. Return to Invoice and Finance GAP are built for vehicles you are buying, and neither responds properly to an early termination charge.
Working out what you need
If you are not certain which agreement you hold, the paperwork will say contract hire, personal contract hire or lease rather than hire purchase or PCP.
To talk it through, call us on 0161 388 2550 or email sales@gapinsurancetoday.co.uk.
