Buyer Question: What is GAP Insurance? 

Comment: Guaranteed Auto Protection “GAP” Insurance covers the difference between what an insurance company will pay, if your vehicle is stolen or totaled, and the remaining balance of your vehicle loan.

We all know a vehicle’s value drops the minute you drive off the lot.  At this point the amount your vehicle insurance covers is the vehicles “actual cash value”. Should your vehicle be stolen or totaled, it will probably be less than your loan balance.  In industry terms you are “upside down”.  You won’t be alone, studies have found over 30% of new vehicle buyers are “upside down”.

Buyers may be “upside down” for one or more reasons:  1) financed the negative balance of the trade-in along with the new vehicle, 2) paid a down payment of less than 20%, 3) financed with a loan greater than 60 months,  4) financed with a high interest rate loan, 5) new vehicle discounts and manufacture rebates can also drive down used vehicle prices.

Buyer Question: Should I buy GAP Insurance? 

Comment: It is an individual decision based on weighting the financial risk and hardship of paying off the amount you are “upside down”, which can be several thousand dollars if your vehicle is stolen or totaled, verse the cost of buying GAP Insurance.  The good news is GAP Insurance is relatively cheap.

Comment: Absolutely … If the dealership offers a better deal, take it and save some additional money. Just be aware dealerships have a reputation for charging significant premiums for GAP Insurance. The same or more coverage can usually be obtained from your insurance agent or over the Internet for significantly less.

The following steps take approximately two hours and could save you up to $400

1. Determine if your financing source requires you to carry GAP Insurance.
2. Determine if you will feel more financially secure having GAP Insurance.
3. If you are required to have or want Gap Insurance obtain quotes from your insurance agent and GAP Insurance Internet sites e.g. Drivers Select, www.gap-insurance.com.
4. Determine the best GAP Insurance policy by obtaining the following information from your insurance agent and  the Internet sites
   1. Level of collision and comprehensive insurance you must carry
   2. GAP coverage limits, $’s and/or  % of vehicles actual cash value
   3. When does coverage begin?
   4. Length of coverage available
   5. Amount of your deductible covered (all, partial, none)
   6. Policy Cost
   7. Policy payment terms e.g. lump sum, semiannual, other
   8. AM Best rating of your insurance company
5. Include the best quotes and policy term and conditions in your Buyer Information Folder.

Classic Dealership One-Liners.

“Your Bank/Credit Union/Internet financing source always requires GAP Insurance.”

Comment: Determine if your financing source requires GAP Insurance before going to the dealership. See Step #1 above. 

“You can’t drive your vehicle off the lot without GAP Insurance.”

Comment: Determine if your financing source requires GAP Insurance before going to the dealership. See Step #1 above.

“Your insurance source (agent, company, Internet site) has a poor reputation for paying their claims.”

Comment: Always check your insurance company’s rating during your insurance research.  See Step #4 (h) above. 

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The purpose of website eAutoAdvantage.com is to provide the user with general information about the subject matter presented.  Website eAutoAdvantage.com is not intended, nor should the user of website eAutoAdvantage.com consider it, to be insurance advice applicable to the user’s specific situation.  The user is solely responsible for the use of website eAutoAdvantage.com.  If the user has any question about a specific insurance situation, they should seek counsel from an insurance agent registered to do business in their state. Also see our general disclaimer.

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