Car finance extras: are they worth the money?

  • GAP insurance is one of the most common extras offered
  • Watch out for dealers adding extras you haven’t asked for
  • Make sure you understand what you will have to pay

Sorting out finance for your car can be a minefield. First you have to decide which type of package you want  depending upon whether you want to own the car and how often you want to replace it – and then you have to translate the contract gobbledegook to work out what you’re signing up for. 

But things don’t finish there. You may have got your head around the finance plan, but what about the optional extras – do you really need them? Here's a rundown of some of the added extras that the dealer might try to sell you and whether you really need them.

GAP insurance

New cars lose value the second you drive them off the forecourt. Should the vehicle be written off or stolen during the finance term, however, you’ll still be liable for the remaining amount of finance, which is very likely to be more than the car’s current market value – the figure insurance companies normally pay out for written-off cars.

GAP insurance – Guaranteed Asset Protection insurance – covers the difference between the market value of the car and the original purchase price (in the case of Return to Invoice GAP) or the amount of outstanding finance on the credit agreement (with Finance GAP), should anything happen to the car.

As there are multiple types of GAP available, it’s worth making sure you know exactly which type is being offered. If you do decide to take GAP insurance, it’s also wise to shop around to ensure that you are getting the right level of cover at the right price, as dealers may charge much more for the same cover than online companies.

Optional servicing packs

However you fund your car, you’ll need to budget for occasional servicing and maintenance. An increasing number of brands offer servicing packs – which you can either pay for up-front or add to your monthly payments.

The prices for these vary wildly, so it’s worth seeing exactly what is included in the cost and how many services the car would need in this period. While a servicing pack may include a number of services, it’s possible that the car might not need such regular attention if set up to simply alert you when a service is needed. 

Therefore, if you’re toying with getting a service pack it’s useful to ask the salesperson to tell you what the car’s servicing intervals are and how many services would be due during the finance term.

Just Add Fuel and other ‘packaged’ deals

'Packaged’ finance deals – like Peugeot’s Just Add Fuel – go one step further and bundle car insurance, road tax, servicing and roadside assistance into the monthly cost. While these offerings provide great convenience, they might not always save you money.

Handily, Peugeot shows the separate monthly cost of adding insurance and road tax, servicing and roadside assistance, so you can tot up what you’d pay if you sorted these things yourself and establish whether this is a good value option for you.

Car finance PPI

Payment Protection Insurance (PPI) miss-selling may have been in the news for several years, and you’re now much less likely to be offered it, but it’s still worth being wary. PPI covers your payments if you become sick or unemployed. The problem with this, however, is that it often provides limited cover and is not suitable for everyone.

If you're self-employed, chances are it won't pay out if you aren't working and if you have a pre-existing illness it is unlikely to cover your costs. If you fall behind with payments and suddenly need to use it PPI might be useful – you just need to make sure any policy you’re considering covers you for that eventuality.

Question every extra and research whether they offer you good value

If there are any extras that you’re not sure of, even if they sound like a good idea, it's best not to sign anything until you have taken advice or investigated the product that is being offered to you. Some dealers may even try to sell you random extras like home insurance when you take out finance with them on a car; bear in mind that it’s unlikely that a car dealer will offer competitive rates – and if you don’t need these then they will never be worth the price.

Whether it be GAP insurance, PPI or other extras such as breakdown cover, warranties, servicing and maintenance packages, legal assistance cover or cover for breakdown abroad, make sure you know exactly what you are getting for your money and exactly how much you will pay, in total – not just each month.

Remember, these extras can be gold dust for car salespeople who work on a commission basis. That doesn’t mean that what they are offering is bad value or a waste of time, but you’ll want to make sure that any extra you’re paying for is valuable to you. Don’t forget that you aren’t tied to your dealer to source finance, with other options including personal loans available. Find out much you can afford to borrow with our finance tool.

Want to learn more about car finance? Click on the links below:

Calculating car finance: How to get the sums right

Finding cheap car finance: our insider tips

Car finance explained: what is PCP?

Best cars for £300 per month on PCP

Car finance vs getting a loan