Lease Gap Insurance and Why It's Important

5 minutes Published: 06/07/2021

Another insurance payment?! You've got to be kidding!

Don't panic - GAP insurance isn't nearly as expensive as 'regular' car insurance. We think it’s an essential and affordable add-on you need to know about if you're considering leasing a new car. 

No matter how careful (or lucky) you are, accidents happen. Lease GAP insurance makes sure they don't land you in a financial rut.

We're going to describe precisely what GAP insurance is and weigh up is gap insurance worth it

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What is GAP insurance? 

GAP stands for Guaranteed Asset Protection and is usually offered when you lease a brand new car. 

If your business or personal contract hire car is stolen/wrecked during your lease period, your insurer is only going to pay you the current market value. This is always going to be less than the original cost to lease the car.  

If the car is written off by your insurer, there may be a gap between what your insurer pays you and what you still owe the lease company, who are the registered keeper of the lease car. A GAP insurance policy covers this difference.

How does GAP Insurance work?

GAP insurance offers you a safety net - if you don't have it and your car is crashed, say, after the first year of your lease, you're going to be in trouble. 

Here's an example where GAP insurance would be used: 

  • You lease a BMW 1 Series that's worth £23,355.
  • Leasing it over 3 years, you pay an initial rental of £2500. 
  • Unfortunately, 1 year later, you crash your 1 series into a tree and it's now a write-off.
  • Your insurance company will only pay out the fair market value of your vehicle - which is about £14,196 (after 3 years depreciation). This is the claim limit - they won't cover what you owe for the rest of the lease agreement. 
  • You now have no car and owe the finance company the last 2 years of your term! 

In this scenario, your GAP cover would cover the shortfall and pay off any outstanding finance left on your deal. This means you have no financial attachment to the late BMW 1 Series and are free to lease another car of your choice. 

It's important to note that contract hire GAP insurance is a complement to your regular insurance. It's not a replacement for good comprehensive cover - you must insure your new vehicle with a reliable and reputable motor insurer!

Do I really need it? 

There are a number of things that can land you in a terrible financial situation with leasing. If you don't have GAP insurance, you could be stuck. 

Here are a few scenarios that are not covered by your car lease warranty

  • Car theft: 300 cars are stolen every day in the UK. With things like keyless entry (which is easy to hack) coming into play, it's never been easier for thieves to steal your shiny new car. 
  • Fire: A fire doesn't necessarily need to happen because of an accident. If a car has a dangerous electrical problem, whether done maliciously or just a fault, then your car can easily catch on fire. 
  • Crashes: No matter how careful you might think you are, we're all susceptible to accidents on the road. You could be the best driver in the world - if someone else makes a big mistake, they can easily wreck your lease car. 

While it's not something we like to think about, having an accident or an unfortunate event happen to your car is a genuine possibility. 

You can't rely on your regular motor insurance alone. We think everyone who has a lease car should have GAP insurance cover to avoid being at a total loss in the event of an accident. See our write off car lease post for more reasons why!

If your broker has allowed you to appoint a car lease guarantor, you should consider them when deciding whether to take out GAP insurance - if you can't make the payments, your guarantor will have to fork out the big bucks!

How much is it? 

The cost of GAP insurance will vary greatly depending on what car model you have, its value, and how long your term is. 

You typically pay the GAP insurance as one premium payment, or as a direct debit over 10 months. Prices can start from £200, but you'll need to contact your lease provider for an exact quote.

Often, GAP insurance is offered to you directly by your leasing company/dealership. This is then added on to your monthly car finance payment, so you can keep your car leasing costs to one monthly fee. 

Are there any other types of GAP insurance? 

As well as Lease Finance GAP insurance, there’s a couple of other options: 

  • Return to Value GAP insurance:
    Aimed at people who’ve bought a pre-owned car, return to value insurance covers the difference between the value of the car when it was new and the maximum payment that your main insurer would make.
  • Vehicle Replacement GAP insurance 
    This covers the difference between the amount that your car would cost to buy the same model of car at the time of the accident and the amount that your insurance company would pay-out if the car was written off. 
  • Return to Invoice GAP insurance: 
    This type of GAP insurance pays out the difference between what you paid for your car on the initial invoice you received and how much the insurer paid you. 

You may have noticed these are all pretty similar. However, the main takeaway is that you don’t necessarily need to be leasing a car to get GAP insurance! 


Leasing a brand new car is usually less risky than buying used. You know you're the first owner, and you don't have to worry about any MOTs or incoming car lease repair costs. 

However, you're at financial risk if your lease car gets ruined. Your insurer will only pay for the value of the vehicle at that time and not the price you leased it for. You could end up in debt to the leasing company until you pay off the remainder of your finance agreement.  

To prevent this, take out some lease GAP insurance - it's affordable, and offers some much-needed peace of mind.

For more information on how car leasing works and what insurance you need for a lease car, why not check out our other articles?

Or if you're simply researching everything you need to know before taking out a lease deal, we're here to help when you're ready to set up a deal. We help you to compare car lease deals from the UK's leading brokers - check out personal car leasing and business car leasing deals for our top car leasing special offers!