It is in this instance that Car Gap Insurance is very important to consider when buying a new car, particularly in the current credit crunch climate where it is becoming increasingly harder to secure a loan, and any financial dire straits caused by car insurance should be avoided at all cost. Should your car be damaged or stolen to the point of being beyond repair or recovery, your insurance company will very likely only pay out for the market value of the car as used, as insurers do not care how much you owe, leaving a huge `gap` between what you owe your creditors which you could be left to fill in with your own money. The average new car depreciates in value by around £500 a month, and, if you are not paying your creditors the same amount in repayments then this `gap` is created in the value of the car compared to what you owe.

The three main insurance types

1. Finance Gap Insurance - covers the gap between the total loss offer of your insurer and the total you still owe to your creditors. This kind of insurance is often offered by car dealers when you purchase a new car, but don`t rush into this first offer, as shopping about will probably get you a better deal.
2. Return to Invoice Gap Insurance - covers the difference between the total loss offer from your insurer and the original price you paid for your car as listed on the invoice. This will net you back the entire sum you originally paid for the car, which is particularly helpful during these financially straining times.
3. Vehicle Replacement Gap Insurance - allows you to purchase a new car by bridging the gap between the total loss offer from your insurer and the latest market cost of a new car. This helps account for fluctuation in the price of new cars.

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