Why a shortfall following a total loss means more than loss of vehicle use?
Buying a motor car for some is an emotive experience, the excitement of a new vehicle whether brand new or a few years old, some cannot help but be carried along and senses kick in to over drive whether it is the smell of a new interior the sound of the engine or lack of, in an all-electric or the discovery of what this or that button does! The automotive sector is well aware that buying a car is one of the bigger purchases we make and are ready to ensure we are not disappointed. Just look at the investment that goes in to advertising, providing premises and customers experiences. It will not be a surprise to note that there a number of innovative ways in which we can fund our vehicles whether we wish to own or simply rent for a short period there are solutions that make owning a modern Euro NCAP five star rated vehicle easy, after all we are a subscription economy.
It is important for brokers to make their customers aware that these innovative funding measures whilst providing access to new and nearly new vehicles, can cause problems in the event of a total loss occurring. Below are some of the areas where the finance agreement may not be in agreement with the motor policy.
- New vehicle replacement – many motor insurance policies offered by insurance brokers will include new vehicle replacement, the wording may vary slightly between insurers however the intention is, in the event of the insured vehicle been the subject of a motor claim, where the vehicle is stolen unrecovered or where the damage is 60% or more of the vehicle value then the motor insurer may replace the insured vehicle with an equivalent model. However recently a leading motor finance company issued the following statement : -
“Volkswagen Financial Services UK Ltd has changed the way we process insurance write off/stolen claims; in the interest of strengthening the security of our assets. As a business, we have taken the decision to discontinue the ‘Like for like vehicle replacement’ discretional benefit, offered as part of our customer’s insurance policies. The move towards settlement is consistent with other businesses within the Car Finance Industry and will promise greater protection for both VWFS and our customers equally”
- Contract hire or lease agreements are not designed to be terminated early, in the event of a total loss occurring the agreement for individuals there is some protection provided under the Consumer Credit Act however for businesses it is a different position: -
When a total loss happens, it is worth considering the protection the Consumer Credit Act gives to a Limited Company.
Below is a summary of whom the Consumer Credit Act protects:
- Private individuals
- Sole traders
- Partnerships of up to three partners
Who the Consumer Credit does not protect:
- Limited companies
- Local authorities
- Partnerships of four or more partners