Buying a new car - how the FCA changes could affect you

From September 1, 2015 the rules upon the sale of add-on GAP insurance (GAP insurance sold by a dealer or finance company in conjunction with the sale of a car) are changing.

If you've ever bought a car from a dealer you’ll have heard the sales patter for everything from car mats to paint protection to GAP insurance. All are offered at a high price, much higher than comparable products sold elsewhere, but for no obvious extra benefit. Apart from giving the dealer enough commission to buy a new three piece suit, perhaps. If you have been in this position you might have decided to do your own research and found that you can buy the same thing at a fraction of the cost. At this point you’d have probably decided to pass on the dealers “offer” and buy elsewhere. Some people have agreed to buy GAP insurance without really knowing what they’re buying – sometimes it’s easier to just say yes. And some did not get the choice. Customers have sometimes had GAP insurance added to their invoice or finance agreement without their knowledge. As a result, the Financial Conduct Authority has decided to clamp down on the way dealers and finance companies sell GAP insurance. From September 1, 2015 dealers have to give you certain pieces of information and time to research alternatives before they can ask you to decide.

They must tell you that you can buy GAP insurance elsewhere

The FCA’s intention is to arm customers with the information to shop around. As a result they will realise the dealer is overcharging for GAP insurance. This may then force dealers to reduce their prices, as comparable policies online are much cheaper. The result of both of these is that GAP insurance will be more valuable to the people that choose to buy it.

The total premium

One of the major findings of the FCA was that 69% of people didn’t know the actual price they’d paid for the policy from the dealer. A fifth of people were unaware that they’d even bought a policy.

What the customer is actually buying

The main features, benefits and exclusions of the policy in writing, along with copies of policy documents

Whether the GAP cover is optional or compulsory

As well as various pieces of information the dealer has to give the customer 4 days to consider the information before they can attempt to conclude the sale, although the customer can choose to bring that forward if they wish. It’s hard to tell what impact the changes will have and the FCA have made it clear that the new rules are to be self-regulated by dealer principles and finance companies. At ALA we are hopeful that the new rules will put a stop to dealers ripping off consumers with high premiums and encourage people to shop around. However there is still a concern that there will be little benefit to consumers as, if the rules are ignored, there doesn't seem to be any enforcement.

Why buy ALA GAP Insurance?

• Access to a variety of GAP to suit your individual requirements
• Fully FCA authorised and regulated with UK underwriters
• Securely process your purchases via our website or speak to one of our experienced advisors
• Our policies have no market value or Glass's Guide clauses. This means that if your insurer settles at lower than the Glass's Guide retail value we still cover the difference so you're not out of pocket
• Free pro rata transfer of your policy if you change your car - with no admin fees
• 120 days to make a claim, instead of the usual 30

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