The Car Write-Off Crisis: Why Your Insurance Payout May Fall Thousands Short
You could lose thousands on your car, even if its parked safely on your driveway. Depreciation is the intangible curse affecting all motorists, the moment you drive off the forecourt a car begins to lose its value. But here’s the kicker: that sliding value doesn’t just hit you when it comes to selling your car, it affects your insurance as well.
If you end up in an accident and your insurer chooses to write your car off, you’ll be given a market value for your car at the time of the accident. And with market values falling, that could leave a large financial gap between what you paid and what you receive from an insurance claim. It’s an issue that is particularly pronounced with newer electric vehicles (EVs) which have seen depreciation of up to 50-60% within 2 years.
Rising vehicle write-offs
Cars are being written off at a rate we’ve never seen before, just last year the number of vehicles being written off rose to over 560,000 vehicles. Since 2020 the number of cars being written off has risen year on year:
| 2020 | 414,593 vehicles |
| 2021 | 449,737 vehicles |
| 2022 | 524,321 vehicles |
| 2023 | 559,870 vehicles |
| 2024 | 562,185 vehicles |
(Credit: ATF Professional)
This growing trend is being driven by a perfect storm of:
- Increased workshop labour and repair costs that make the cost of repair higher than the vehicle’s residual value
- Difficulty sourcing parts for repairs
- Stricter repair viability assessments
For insurance companies, it’s now often cheaper to write off a vehicle than to repair it.
The Insurance payout GAP
When a vehicle is written off, insurers base their payout on current market value – not what you paid, or what you may still owe on finance. Worryingly, average GAP payouts have almost tripled since 2021, with customers increasingly caught out by shortfalls.
Stephen Griffiths of Allegiant Financial Services:
“We are seeing concerning signs that insurers haven’t fully taken on board the FCA’s warning about undervaluation."
An insurance undervaluation can put a sting in the tail for many customers, especially those with newer cars or vehicles on finance agreements. Leaving innocent customers footing the bill to replace their car or clear outstanding finance.
How to protect yourself from financial loss
One of the most effective ways to protect against a shortfall is with GAP Insurance. A MotorEasy GAP policy can cover the difference between your vehicle’s market value at the time of the claim and - depending on the type of policy purchased - either:
- The car’s original invoice price (return to invoice GAP),
- The value of your vehicle when you first purchased GAP insurance (return to value GAP)
- The outstanding finance settlement (contract hire or lease GAP)
Some recent MotorEasy GAP payouts have exceeded £20,000, particularly for higher-value EVs and luxury vehicles prone to theft.
How to avoid the depreciation trap
Keep track of your car’s real time value with MotorEasy’s free valuation tool inside your account area. If you’re concerned about facing a financial shortfall a MotorEasy GAP insurance policy can give you peace of mind, especially if you have purchased a car on finance. With vehicle write-offs rising and payouts often falling short, it’s one way to make sure you’re not left with a financial loss on top of the stress of having your car written off!
