Credit Shortfall Insurance (Part 4)

HOW LONG DOES IT TAKE BEFORE THE FINANCE SETTLEMENT AMOUNT IS LESS THAN THE RETAIL VALUE?

Once again, this all depends on your Finance Arrangement.

Below are just examples:

• If a 10% deposit was paid and the vehicle financed over 54 months the Settlement Amount should be less than the Retail Value within 12 – 18 months.

• If a vehicle is financed without a deposit but over a 60 month term, without a residual value, typically this point is reached after 18 – 24 months

• If a vehicle is financed with eg. a 40% Residual Value over a 60 month term, the point where the Settlement Amount is less than the Retail Value is only reached after 36-42 months.

The underlying principle is this:

The longer the finance period or the higher the residual percentage, the higher the interest due. The higher the interest, the longer it takes for the SETTLEMENT AMOUNT to be less than the RETAIL VALUE.

CONCLUSION:

What this means is that should your vehicle be written off or stolen during the period that it is still under finance you might face a situation where

your insurance policy pay out will be less than the settlement of the bank.

The fact is you will be liable for this difference (Credit Shortfall) unless you have taken out Credit Shortfall insurance at the time that the vehicle was purchased.

So again the question…

Have you taken out Credit Shortfall Insurance ?

We believe that the risks faced by each business and each individual is unique. We believe in providing each business, and each of our clients with a comprehensive insurance solution that addresses their own unique and individual risks. Contact us today!