In our latest article looking at what sets Lockton's policy apart from others we will be focussing at some of the benefits that aren't commonly found on other motor insurance policies.

The way that we purchase our cars has changed over the last few decades and fewer than ever are buying outright, with leases, contract hire purchase and straight finance being the most popular ways to acquire a new vehicle.

Our research discovered that, in 2022, over 92% of new cars sold were bought this way and we borrowed £17.5 billion – a staggering sum. When used cars are added to the total, a further £22.2 billion was loaned during the year.

Vehicles traditionally depreciate. This may not be the case for more expensive and specialist cars, and certainly not for many classics and the supply chain shortages seen since mid-2020 meant that many more mainstream models saw values actually increase, in some cases by as much as 30%, although there are signs that the market is starting to re-adjust.

When you use finance to buy a car, the lender will charge interest for this arrangement. Whilst this simplifies the process massively, it is of course how lenders generate revenue.

If your car does depreciate from the point of sale, then its value will be less than the amount borrowed plus interest, even as the amount owed reduces over time.

This means that if your car were to be written off following a collision or other incident, or stolen and not recovered, the amount that you will receive may not be sufficient to clear the finance outstanding.

It is worth highlighting at this point that a finance company will calculate what is termed an “early settlement figure” if the finance is to be repaid before the end of the term of the loan. This is calculated differently depending on the lender.

Most motor insurance policies will pay the car's market value and not any shortfall between this and the amount owed to the lender.

Lockton's policy on the other hand, will pay the difference between the total loss settlement and any unpaid amount owed on a lease or financial agreement relating to the vehicle. There are some exclusions, such as overdue payments, charges for wear & tear or excess mileage and any additional products purchased with the finance and carried-over balances from previous finance or leases.

This means that you do not need to purchase additional gap or return to invoice (RTI) insurance when you buy your vehicle, as our policy gives you this cover on any vehicle or vehicles you insure through Lockton.

One of the common themes within our series of articles is that we understand that a single benefit provided under our policy in isolation may not make you rethink how you purchase insurance, but when considered collectively, they provide wider and more flexible solutions than many other policies – and, in the case of our built-in gap cover, potentially save you money.

If you'd like to know more, please talk to us today.