GAP Insurance – What is it?
What is gap insurance, you may be asking? Well let me explain it to you as easy as I can. If you’re planning on financing a vehicle with little to no money down you should be reading this. In a perfect world we wouldn’t get into accidents and vehicles wouldn’t depreciate however we do…and cars do depreciate. If in the unfortunate situation you are involved in a car accident that requires extensive repairs, your auto insurance company may not be able to recover the cost of any depreciation of the vehicle. If you purchase a new or used car with a car loan, your insurance company will only pay you for the actual cash value of the car when it is a total loss. This means that you will still be responsible for making payments on the original car loan, and you could end up paying hundreds or thousands more for a car that no longer has the same value.
3 reasons why you would get GAP insurance.
- – You're purchasing a used car that has a high depreciation rate.
- – Your used car is less than two years old.
- – You made a very small down payment.
Gap insurance does exactly what it says. It covers the “gap” between what you owe to the bank, and what monetary value your insurance company decides your car is worth. A small investment when purchasing your vehicle can save you Thousands of dollars and stop any financial headaches.
Have more questions? Don't be afraid to ask when you come see us about your next vehicle.