Why would I need GAP insurance?
Have you ever heard someone say when you drive a brand new car off the lot it depreciates by about 20%? Well this is very true, maybe not always 20% however it does lose it’s value immediately because it’s no longer new. This can be a huge problem for you if you are involved in an accident which totals your vehicle. You now have a loan for the entire price of your new car, you drove it off the lot and it depreciated 20% and now it’s totaled. The insurance company offers you a payoff based on the fair market value for a used car which is 20% less than you just paid! Now you end up without a car and a loan for the remainder 20%. There are ways around this such as purchasing a separate insurance policy called GAP insurance. What this does is it will cover the remaining amount you owe to the lender up and above what the insurance company is willing to pay for your car. The plans are often quite affordable and worth looking into for peace of mind.
November 11th, 2007 at 5:23 pm
Or you can put enough down on the car where your not upside down on the loan, in my opinion you should never take out a loan for more than you can get back out of an asset.
If you do need gap insurance never go through the dealer, as with everything else they charge a premium. You should check with you Insurance company to see if they offer GAP insurance.