Is GAP Insurance Worth It?
GAP insurance, like extended warranties and service packages, is one of those “extras” a dealership may try to sell you before you drive off the lot with a new vehicle.
But is GAP insurance worth it?
What is GAP Insurance and Why Would I Need It?
Guaranteed Asset Protection, known as GAP Insurance, is designed to help bridge the gap between what you owe on a vehicle and what your vehicle is actually worth if an unfortunate accident or theft occurs.
Here’s a good way to think about it:
A 20% down payment is a pretty standard rule of thumb when buying a house. It helps you avoid private mortgage insurance and provides protection against your loan being under water from the start.
The same holds true for vehicles.
Particularly if your down payment was less than 20% of the purchase price, there is a good chance you may owe more than your car is worth in the event of a total loss.
GAP Insurance provides another layer of certainty for car buyers.
When Should I Consider GAP Insurance?
Nobody on the road is invincible. Accidents happen every day on every major roadway.
GAP Insurance is not for everyone, but if you fit the following profiles, we strongly suggest looking into a GAP Insurance policy:
- You are putting less than 20% down on your vehicle purchase
- You are agreeing to loan terms beyond 48 months, resulting in lower, drawn out payments
- You are rolling negative equity into a new auto loan
- You have a long commute, as high mileage can depreciate the value of your car faster
- You plan to purchase a vehicle with a history of poor depreciation (according to Forbes, the Nissan Leaf, Dodge Charger and Mercedes Benz S-Class were among the worst in 2015).
GAP insurance is only available at loan origination. Those who refinance their vehicles are originating a new loan and therefore, have a second chance to purchase GAP insurance.
If you passed on GAP at the dealership and now have concerns about the difference between the value of a vehicle and the amount owed on the loan, refinancing may be the perfect opportunity to purchase affordable GAP coverage.
How Much Does GAP Insurance Cost?
Generally, GAP insurance costs less than the 11% average value that a vehicle loses when it leaves the lot.
GAP insurance is a low-risk, high reward proposition, and is usually only needed for a few years. In most cases, GAP coverage will also cover your deductible for total loss claims.
If you carry a total loss deductible of $500, $1,000 or more, GAP insurance has, in many cases, already paid for itself without even taking into account the difference in fair market value vs. what you may still owe on the loan.
Is GAP insurance worth it?
For most vehicle owners, the answer is a definitive yes.
Refinancing Your Car? Add GAP Protection
Refinancing your vehicle provides a great opportunity to assess your loan to value ratio and purchase an inexpensive GAP insurance plan.
Consumer Auto Refinance Services Inc. (CARS) offers refinance customers the option to add GAP insurance to their new auto loan. Unlike other GAP insurance providers, we charge a one-time, low fee for GAP protection. This fee is executed at the time of your new or refinanced loan is originated and can be rolled into the balance of your refinanced loan.
We offer refinance rates starting at 2.49%.
If you currently have a higher rate on your auto loan and wish you hadn’t passed on GAP benefits, now is the perfect time to get both.
GAP insurance plans from CARS provide up to $50,000 in benefits, as well as $1,000 in deductible reimbursement.
Contact CARS today to learn more about GAP coverage and refinance options today!