Updated: 21st Apr 2015

Buy GAP insurance

If your car is written off or stolen soon after you take out a finance agreement, you could owe more than the car is worth. For example, if you buy a brand new car for £12,000 and write it off after a year, your insurer may offer you £8000, because that's what the trade guides say it's worth. But if you still owe more than £8000 on the loan, you'd owe more than the car is worth, potentially leaving you well out of pocket. To avoid getting into financial difficulties, the solution is to take out GAP (or Guaranteed Asset Protection) insurance.