Hi, I'm Graham Hill, author of Electric Cars - The Truth Revealed. You can get a copy of that by going to grahamhilltraining.com and buying a copy, and if you want to pay the upgrade for the training that will be coming out in 2024, then you can pay for it at the same time and get it at a very low price. If you wait till the training actually comes out as a stand-alone product, then we'll be charging a lot more for the course. Okay, we're talking about insurance and the effect of insurance on electric cars and electric cars on insurance. So these are the things that people don't tell you about. The dealerships don't tell you about it. The lease brokers don't tell you about it. When you get a car, it's abysmal. What we need to do is flood the market with information. So once potential customers have got plenty of information, they feel comfortable going ahead with either buying a car, leasing the car, putting it on hire purchase, PCP or any other type of finance.
I spoke about driving through a flood in the last podcast. This is now number four and I just want to talk very briefly about having minor accidents in the car, which could surprisingly result in the car being written off just because there's some minor damage to the battery pack underneath the car. A lot of the insurance companies have revealed that rather than try and repair the battery pack which could lead to other problems down the line, they are comparing the cost of replacing the battery pack with the value of the car. With the cost of the replacement battery packs so expensive they're saying they're not going to bother replacing the pack, they're just going to write the car off. And this is happening more and more. We're seeing a lot of these reports in the press. The salvage companies that are receiving these cars are complaining that they're getting backed up with electric cars that need to have the batteries removed and safely stored. They currently have to store them because they've got no way at the moment of disposing of them in scale, reusing them or recycling them, although some of new start battery recycling companies are now starting to scale up. But there's still challenges to overcome.
It’s important for electric car drivers to understand how a minor accident could lead to a heavy bill. If you have a minor accident in your car, you don’t expect to have the car written off. However, if you have a minor accident in your car and there's a couple of hundred pounds worth of damage to the bodywork but without realising when you slipped off the road, you bounced over a pavement and caught the underside of the car, which damaged the battery pack. Now, suddenly, out of the blue, the car's been written off by your insurance company. You weren't ever expecting that. But, did you take out GAP insurance the abbreviation for General Asset Protection Insurance? It's a good expression because it does fill a gap. Now, if you haven't taken out GAP insurance, you could be thousands of pounds out of pocket, more so with electric cars than with a petrol or diesel car, because, as I say, you could have just a relatively minor accident and end up having the car written off.
Now, if you've got the car on a contract hire or lease, as many people refer to it as, then if the car is written off, you need to have the finance GAP, or financial GAP, which makes up the difference between what the insurance company will pay out and the settlement figure from the finance company. The finance company says, well, we want £18,000, and the insurance company says we're going to pay £15,000. So there's a £3,000 difference. Now that is made up by the GAP insurance. There are other advantages to Financial GAP to look out for. So make sure you not only get that GAP covered, which it will be, but also when you took out the finance on the car you paid an initial rental. .
If you now want to take out a new lease agreement, you've got to find a down payment again. So most of the policies cover up to £2,000 worth of initial rental equal to what you would have paid. So you get that back if the car is written off. You also get that on the top of the financial GAP between the settlement figure and what's been paid out by the insurance company. It also covers the insurance excess up to a maximum of normally £1,000. So it covers your excess on the claim and it also covers your initial rental figure of up to £2,000. So it's well worth having if you lease your electric car but you’re rarely offered it because the supplying broker needs additional FCA permissions if they’re providing insurance products.
On the other hand, if you have financed a car on a PCP, you've got two GAP Insurance alternatives. You've got Back To Invoice, which is what you originally paid for the car, so they'll take you back to the invoice price. The insurer will settle out the finance that's outstanding and then you'll get the difference paid back to you. So you can go into the same agreement paying the same amount of money which is OK if the cost of the new car is the same and the monthly rentals are the same. But that might not get you the same car again because the car price is generally going up all the time. So there's another form of GAP Insurance which isn't back to invoice. It's a direct replacement, so it will be a like for like amount of money replacing the written off car with the same car irrespective of how the cost may have increased. They don't give you the car, they give you the amount of money. So let's say the money that you paid on the car was £30,000 and it's now gone up to £34,000. If it was back to invoice it would be £30,000 less what the main insurer pays out so that you still receive £30,000. From this there will be a settlement amount to pay the finance company to settle the finance leaving a balance to come to the insured. If you have replacement GAP, then The GAP insurance will pay the current cost of the same car, let’s say it's £34,000, and the main insurance payout. So you should have enough to buy the same car on a PCP but brand new.
So what I'm saying is, with the higher likelihood of electric cars being written off for relatively minor damage, you need to make sure that you consider GAP Insurance. It's an expense, but it's a worthy expense, and I'll talk about that in another podcast, because there are reasons why you're given some time before you actually sign the papers for your GAP Insurance if you're taking out a finance agreement and I'll discuss that in either the next podcast or next one but two. So that's it on the GAP Insurance for now. Thanks very much for watching. I’ll catch you on the next one.