Whether you’re buying your car brand spanking new or second hand, you’ll likely suffer the hard sell on a plethora or extras. But could you be paying extra on those extras?
Perspective can be everything. If you were shopping for car insurance on a comparison website, a price difference of £477 might mark the difference between first and 30th place in your results. You probably wouldn’t even scroll that far down the screen.
But if you’re already laying out thousands (or tens of thousands) on a new dream car, and the salesperson proposes dropping in a neat bundle of additional insurance products, a margin of several hundred pounds can seem like small change for the convenience and quickly gained peace of mind. After all, by this point, the end is in sight after hours of researching, customising and negotiating in different dealerships – not to mention the test drive and deciding on your method of payment.
But the chances are that you could ‘mislay’ hundreds in overpriced dealership insurance.
Inertia selling
Dealerships bank on this kind of customer inertia to sell financial products that are likely to be worth a fraction of their price. When we sent undercover researchers to dealerships of six major carmakers, 19 out of the 24 garages visited were pushing insurance add-ons. Three years’ worth of minor damage insurance – covering cosmetic repairs for bumps and scrapes – was offered for £500 on a Volkswagen. We found comparable cover online for £269 on average.
The most expensive was ‘Gap’ insurance – bridging what your insurer pays you and what you paid for the car if it’s stolen or written off. Costing £619 at one Audi dealership, it was less than a quarter of the price (£152) online.
The most expensive insurance package we were offered – comprising Gap (£399), minor damage cover (£399), and tyre insurance (£250) – totalled £1,048 from a Honda dealership. We’d have knocked this down to £571 (saving £477) by going elsewhere for the extras.
Uncompetitive rates
After a study of the market, the Financial Conduct Authority concluded dealerships were selling Gap policies at uncompetitive rates and set out new rules on how they could be sold, in force since September last year. These changes compelled dealerships to build a four day period between recommending and completing the sale of Gap insurance – giving customers more of a chance to shop around and consider their choice.
So far, though, dealership Gap prices are still easily undercut by online rivals. We think it’s healthy to assume that most of the extras a dealer offers – from insurance to protection sprays for paintwork and interiors – are priced way above their actual value. So you’d be missing a trick to not, at the very least, challenge the dealer to reduce the first price they offer.
Have you paid over the odds for dealership extras, or had success in bargaining down the prices? Let us know.
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