GAP insurance
Should your car be written-off or stolen soon after you take out a finance agreement, you could find yourself in a nasty situation. You could potentially owe more than the car is worth, especially if you've put down a small deposit and the car depreciates heavily within the first few months. To avoid getting into financial difficulties, the solution is to take out GAP (Guaranteed Asset Protection) insurance. The key points are:

• You don't have to take out GAP insurance, although a finance company may insist you do if you're a high-risk driver or you've paid only a very small deposit.
  
• You can pay for it as a one-off fee or maybe as part of your monthly finance repayments.
  
• GAP insurance is unlikely to be worthwhile if you've put down a large deposit on your car.
  
  Payment protection
  When you take out a finance agreement, it's usually on the assumption that your personal circumstances won't suddently take a turn for the worse. However, illness and redundancy are everyday occurrences - and they could potentially affect you too. If you were to lose your job and not be able to work for a period because of illness, you could end up losing your car because you can't afford to keep up the payments on it. This is when you need payment protection.
  
  
• Payment protection is normally paid monthly, at the same time as any finance repayment.
  
• Not everyone is eligible for it; if you're long-term sick or self-employed, you probably won't be able to take it out.
  
• There may be a limit to how many payments are made under the scheme - don't expect your car to paid off necessarily.
  
• It may also not kick in immediately - you may have to find the money for the first three months after a change of personal circumstances.
  

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