Why is Easy Gap Insurance cheaper than your motor dealer?If you are looking into Gap Insurance for the first time, and you are comparing the prices of an Easy Gap policy to that offered by your motor dealer, then it is understandable why you may ask the following question:
Why is Easy Gap Insurance so much cheaper than the policy offered by your motor dealer?
Surly there must be a difference in the levels of cover?
The difference can be on average, 70% or even higher when you are comparing against higher priced vehicles. There are three simple reasons behind the difference, and when you combine the effects of each you can see why the premium prices can be so different.
Differences in Insurance premium Tax
1 - Tax - when you buy a vehicle from a motor dealer in the UK, and they offer you an insurance product (which gap cover is) then they must charge Insurance Premium Tax at 20%. This is the same rate of interest as VAT.
If you buy gap insurance from an independent source, like an insurance broker, the IPT rate is only 6%.
Why? Well as the vehicle sold to you is subject to VAT at 20%, the law states the insurance sold by the motor dealer must be at the same rate of tax. This is a fact that is often not known by car salesmen, but is a major reason for the cost being much higher.
Gap Insurance is just like any other buiness Volume Counts!
2 - Economies of scale - Your car dealer can only sell a gap insurance policy to someone they sell a vehicle to. So if the vehicle dealer sells only 500 motors a year, then they may sell 200 gap insurance policies. A specialist insurance broker, like EasyGap.co.uk, will sell that many in a few days, and therefore represents much higher business to the insurer. This higher level of business will attract wholesale discounts on the supply of the insurance product.
This discount can be passed on to the purchaser, ie you!
Operational Costs & Profit - Like any brand in the UK, Easy Gap Insurance is a business and we need to make a profit to provide our service. The motor dealer is exactly the same, and it is fair to say that as profit margins in car sales have been squeezed the motor dealers can look to add on products ,such as finance, paint protection and Gap Insurance, to provide extra profits.
When you walk into a showroom you can see immediately what is costs to run such a business. When you look at the sale of a Gap Insurance product then it may be the case that a commission is paid to the salesman, the business manager and perhaps even the sales manager too. So this would mean a higher profit margin may need to be built in to make the sale worthwhile.
At Easy Gap we have bills to pay too, but running an Internet based insurance brand, with a specialised customer service team is a far less costly exercise than running a car dealership. Our profit requirements are much lower, and therefore we can pass on the savings to our customers.
So when taking into account these three factors, you can see why Easy Gap policies can be so much cheaper than your motor dealer.