Cheap Gap Finance Car Insurance
Car finance gap insurance might be the most significant vehicle insurance coverage option you've never heard of.
Most motorists assume collision and comprehensive coverage offers full protection if their vehicle is stolen or
totaled. But if your new vehicle is financed or leased and you experience a total loss, you may be in for a shock.
Suppose you just bought a brand new car or truck for $25,000. You put $1,000 down and finance the balance -
$24,000 - over a five year period. You purchase the mandatory collision and comprehensive coverage with a
standard $500 deductible.
Regrettably, a few weeks later your vehicle is hit by a bus - you survive, but your car doesn't. So you file a claim
and your insurance provider notifies you they've settled on a payment of $21,000 based on your car's actual cash
value at the time of the accident. You think you're in good shape until you find out from the bank the loan pay-off
amount is $24,000 - $3,000 more than the value the insurance company assigned you car. When you add in the
$500 deductible, you now have a hole $3,500 deep to dig yourself out of.
Car finance gap insurance will help you dig out of that hole
Gap insurance covers the difference between what you still owe on the car and what your insurance company
says it's worth up to 125% of the MSRP.
How long do I need gap coverage?
The moment the car salesman hands you the keys to your new car its value depreciates by 22% on average. If you
made a 5% down payment you already owe 17% more than your car is worth. If you combine a low down payment
with an extended, 5-7 year loan term, you should plan on living with a gap in your coverage for 2½ to 3 years.
However, for the reasonable sum of around $30 a year, the additional gap protection is hardly a financial burden.
Once the equity in your new car, truck, or motorcycle catches up with the vehicle’s actual cash value you are free
to call your gap insurance provider and tell them to drop the gap portion of your coverage.
On the other hand, gap insurance purchased at a dealership can run as much as $500 - $700 and cannot be
canceled once the contract is in force. So after 2 or 3 years you’re essentially paying for something you don’t
need, and can’t use anymore.
To find out when the value of your car and loan balance reach parity you can periodically check your car’s value at
KBB.com and compare it to the loan pay-off amount available on your bank’s website.
Cheap gap finance car insurance
Since the cost of gap coverage is only around 3% of the total premium, the best way to purchase gap is to find out
which insurance companies offer it, and then choose the company with the lowest quote – which is what you
would do anyway.
Most motorists assume collision and comprehensive coverage offers full protection if their vehicle is stolen or
totaled. But if your new vehicle is financed or leased and you experience a total loss, you may be in for a shock.
Suppose you just bought a brand new car or truck for $25,000. You put $1,000 down and finance the balance -
$24,000 - over a five year period. You purchase the mandatory collision and comprehensive coverage with a
standard $500 deductible.
Regrettably, a few weeks later your vehicle is hit by a bus - you survive, but your car doesn't. So you file a claim
and your insurance provider notifies you they've settled on a payment of $21,000 based on your car's actual cash
value at the time of the accident. You think you're in good shape until you find out from the bank the loan pay-off
amount is $24,000 - $3,000 more than the value the insurance company assigned you car. When you add in the
$500 deductible, you now have a hole $3,500 deep to dig yourself out of.
Car finance gap insurance will help you dig out of that hole
Gap insurance covers the difference between what you still owe on the car and what your insurance company
says it's worth up to 125% of the MSRP.
How long do I need gap coverage?
The moment the car salesman hands you the keys to your new car its value depreciates by 22% on average. If you
made a 5% down payment you already owe 17% more than your car is worth. If you combine a low down payment
with an extended, 5-7 year loan term, you should plan on living with a gap in your coverage for 2½ to 3 years.
However, for the reasonable sum of around $30 a year, the additional gap protection is hardly a financial burden.
Once the equity in your new car, truck, or motorcycle catches up with the vehicle’s actual cash value you are free
to call your gap insurance provider and tell them to drop the gap portion of your coverage.
On the other hand, gap insurance purchased at a dealership can run as much as $500 - $700 and cannot be
canceled once the contract is in force. So after 2 or 3 years you’re essentially paying for something you don’t
need, and can’t use anymore.
To find out when the value of your car and loan balance reach parity you can periodically check your car’s value at
KBB.com and compare it to the loan pay-off amount available on your bank’s website.
Cheap gap finance car insurance
Since the cost of gap coverage is only around 3% of the total premium, the best way to purchase gap is to find out
which insurance companies offer it, and then choose the company with the lowest quote – which is what you
would do anyway.
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