How GAP Insurance Was Sold With PCP — A Double Scandal
GAP insurance wasn't just mis-sold — it was often added on top of already mis-sold car finance
Here's what makes the GAP insurance scandal even worse: in many cases, it was added on top of car finance agreements that were already mis-sold. Consumers were being hit twice — first with hidden commission on their PCP or HP finance, then again with hidden commission on the GAP policy sold alongside it.
The Perfect Storm at the Dealership
Picture the scene: you've spent hours at the dealership. You've test driven the car, negotiated the price, and now you're in the finance office. You're tired. You're excited about your new car. And that's exactly when they struck.
The finance manager presents GAP insurance as an essential add-on. They explain how your car will depreciate, how you could be left thousands of pounds out of pocket if it's written off. It sounds sensible.
What they don't tell you is that they're about to pocket 70% of whatever you pay.
GAP Insurance: The "Easy Win" for Dealers
For car dealers, GAP insurance was the perfect bolt-on sale:
Customers in "buying mode"
The car deal was done, resistance was low. You were ready to sign anything to drive away.
Small sums, big profits
What's another £300 compared to the car price? But £210 of that went straight to the dealer.
Fear factor worked
No one wants to be left with debt on a written-off car. The pitch was designed to worry you.
Enormous commissions
Up to 70% of the premium, with minimal effort. The incentive to sell was huge.
What You Weren't Told
The key to this scandal lies in what dealers failed to disclose:
1. GAP Insurance Was Optional
Many customers were given the impression that GAP insurance was required to get the finance, or that the deal wouldn't go through without it. This was false.GAP insurance was always optional.
2. You Could Buy It Elsewhere — For a Fraction of the Price
The exact same GAP cover that cost £300-£500 at the dealership could often be purchased online for under £100. Dealers had no incentive to tell you this — doing so would cost them hundreds of pounds in commission.
3. The Commission Structure
At no point were customers told that the dealer was pocketing 70% of the premium. If you'd known that only 30p of every pound was actually going towards your insurance cover, would you have bought it?
4. The 14-Day Cooling-Off Period
You had a legal right to cancel within 14 days for a full refund. How many customers were clearly informed of this right?
Added to Already Mis-Sold Finance
Here's where it gets even worse. We now know that millions of PCP and HP finance agreements were also mis-sold through Discretionary Commission Arrangements (DCAs). Dealers could increase your interest rate to earn more commission — again, without telling you.
So many consumers found themselves in this position:
- 1Paying inflated interest rates on their car finance (hidden commission)
- +Plus paying inflated premiums on GAP insurance (hidden commission)
- !While being told neither
The finance industry had created a system where they profited at every turn, while customers remained in the dark.
You May Have Two Claims
If you took out car finance with GAP insurance between 2007 and 2021, you may be entitled to compensation on both:
Your Car Finance Agreement
If discretionary commission wasn't disclosed on your PCP or HP finance
Your GAP Insurance Policy
If the commission and alternatives weren't disclosed when you bought it
Blue Lion Law can assess both claims together, ensuring you don't miss out on compensation you may be owed.
Check Both Your Claims
Don't miss out on compensation. Blue Lion Law can assess your GAP insurance and car finance together.