Car dealers charge up to £367 more for Gap insurance

Motorists are being charged hundreds of pounds more for additional car insurance add-ons by dealers than if they were to take out a similar policy with a traditional provider, a new investigation has found.

Anyone who has bought a new car in the last decade will know that salesmen will offer a range of additional cover products with the vehicle including Gap insurance, interior protection policies and safeguards against wheel and pain scratches.

But charges offered in showrooms are substantially higher than if you shopped around with conventional insurance providers, with some dealer quotes being 278 per cent more expensive, according to new research by consumer association, Which?.

The consumer group said the higher costs are due to hefty commission rates being pocketed by dealerships who bombard buyers with extras to protect their gleaming new motors.

Car dealerships have been found to charge up to 278% more than conventional insurance firms The higher costs are said to be due to hefty commission rates being pocketed by dealerships The higher costs are said to be due to hefty commission rates being pocketed by dealerships

The higher costs are said to be due to hefty commission rates being pocketed by dealerships

For example, purchasing Gap insurance for a Ford Fiesta from a dealership was £499. That compared to an average price of only £132 for the same protection purchased directly from an insurer.

Even the smallest disparity for Gap insurance was 102 per cent – for a Honda CR-V SUV that cost £415 from a dealership, but just £205 on average from an insurer directly.

The FCA reported earlier this year that it had found numerous examples of dealerships receiving high and potentially excessive levels of commission.

The average level of commission (after Insurance Premium Tax) taken by car dealerships when selling these policies was 71 per cent. It also found that car dealerships selling scratch and dent insurance were receiving an average commission of 54 per cent.

The FCA also found examples of Gap products being sold to ineligible customers who did not need the cover, prompting concerns about potential mis-selling.

Some firms were found to be pushing the insurance through distributors where some or all of the vehicles being sold were second-hand, meaning the product was often unnecessary or of nearly no value.

Since publishing its findings, the FCA has warned insurers not to allow dealerships to receive commission ‘which bears no reasonable relationship to the costs or workload to distribute the product’.

And Which? found that disparities extended beyond Gap insurance.

Quotes for cosmetic and dent insurance was almost 60 per cent lower from an insurer directly compared to a car dealership, while alloy wheel and tyre insurance was up to 26 per cent cheaper.

Jenny Ross, Editor of Which? Money, said: ‘We’re really concerned that car dealers are continuing to pocket huge commission fees from selling insurance products at rip-off prices, despite recent scrutiny from the financial regulator.

‘The FCA needs to keep a close eye on these practices and be ready to step in with strong action if consumers face mis-selling or unreasonable charges for these products.’

Leave a Reply

Your email address will not be published. Required fields are marked *