GAP Insurance – the what, when, and who to buy it from
What is GAP Insurance? If you don’t already know, it’s the insurance to cover the difference in what you owe on the car or vehicle loan and what the vehicle is worth. Most people know when they drive a new vehicle off of the lot, it immediately loses value. If you were to drive it and put a few thousand miles on it, you couldn’t sell the car for what you owed on it – hence, there is a GAP in what’s owed and what the car is worth.
Should you buy it? You would be silly not to, if you were to get in an accident, you would be stuck paying the difference in what your regular car insurance pays off and what is truly owed on the car. Moreover, some states, such as New York, require vehicle purchasers to carry this insurance.
Should you buy it from the dealer? If you’re crazy or just don’t care about money. Dealers typically charge around $500 or more for this insurance.
Where can you buy it for far less? Believe it or not, most local credit unions sell the insurance for a third of the cost dealers sell it for. That’s right, most local credit unions sell this GAP insurance for around $150.
Other options besides GAP insurance? Some insurance companies offer what is called total loss coverage. In essence, the insurance company in the event of a total loss on your car will provide you with a down payment towards a new vehicle (or a sum of money that you could use to pay the GAP). It only makes sense to figure out what is the better deal on your end.