To Gap or Not to Gap

[SJSWING]

Looking at purchasing a new vehicle. We were asked by the finance office if we wanted Gap insurance. I know in some cases this is good, but in others not so good. We are putting a sufficent amount of money down on the vehicle (over 5000) while the vehicle is totaling just over 17000. Should we purchase the gap insurance they are offering, or should the money be good enough of a down payment to cover the depreciation when we drive it off of the lot.

Your thoughts?

 

[Crewdawg141]

Looking at purchasing a new vehicle. We were asked by the finance office if we wanted Gap insurance. I know in some cases this is good, but in others not so good. We are putting a sufficent amount of money down on the vehicle (over 5000) while the vehicle is totaling just over 17000. Should we purchase the gap insurance they are offering, or should the money be good enough of a down payment to cover the depreciation when we drive it off of the lot.

Your thoughts?

The better question is where do you live, where do you drive and park your car normally, and how is the vehicle operated? How long is it financed for? Also very important, what kind of car is it? Is it worth more in parts than whole?

 

[tonyb]

Re; GAP Purchase

In your best interest on a new vehicle. its prefereable to buy GAP insurance.

Once a vehicle is driven off the lot, depreciation begins, no matter how much you don't agree with it. Your regular auto insurance is designed to pay the vehicle's current cash value -- not the current loan balance.

Say - You buy a $20K vehicle, and a month later after ownership and numerous miles you have an accident that totals the vehicle.

An insurance appraiser approves it at $16k totaling costs and your loan is still $20k plus interest. (Aside from your down payment).

You have to come up with the additional $4K plus interest costs to buy off the remaining amount of the loan.

So, research it in full before you buy or decline GAP insurance and whether or not it is actually right for you to purchase and your given budget constraints.

Good Luck..

imo,

tonyb

 

[aps45819]

Look up the blue book value of your car.
The difference between that number and you loan payoff is the amount you'll be required to pay if the car gets totaled.
Do you need a separate insurance policy to cover that amount?
Yes - get the insurance, No - don't

 

[lovinmaryland]

Defintely get the Gap coverage. Or better yet check around for your loan. Several carries offer total debt cancellation for no cost included in the financing. State Farm for one.

I can not tell you how many clients I have seen over the years who have been stuck w/ thousands of $$$ for a vehicle that has been totaled out.

Better safe than sorry

 

[Chasey_Lane]

Look up the blue book value of your car.
The difference between that number and you loan payoff is the amount you'll be required to pay if the car gets totaled.

GAP insurance only covers the principle payoff; not interest.

 

[aps45819]

GAP insurance only covers the principle payoff; not interest.

interest stops accruing once you pay it off

 

[Chasey_Lane]

interest stops accruing once you pay it off

Thank you, Captain Obvious.

 

[Softballkid]

State Farm told us not to get it because our full coverage policy covers the loan pay off, no matter the loan total left. :shrug:

 

[Larry Gude]

Looking at purchasing a new vehicle. We were asked by the finance office if we wanted Gap insurance. I know in some cases this is good, but in others not so good. We are putting a sufficent amount of money down on the vehicle (over 5000) while the vehicle is totaling just over 17000. Should we purchase the gap insurance they are offering, or should the money be good enough of a down payment to cover the depreciation when we drive it off of the lot.

Your thoughts?

Absolutely, 100% yes. How much is it, $200-300?


Yes.

 

[itsbob]

GAP insurance is another dealer "incentive" for their salesman to make more money.

Just like extended warranties, and after market warranties, undercoating, rustproofing, paint protection, etc.. etc.. the commission on those sales is HUGE. The ONLY person that benefits from it is the salesman.

 

[Larry Gude]

GAP insurance is another dealer "incentive" for their salesman to make more money.

Just like extended warranties, and after market warranties, undercoating, rustproofing, paint protection, etc.. etc.. the commission on those sales is HUGE. The ONLY person that benefits from it is the salesman.

Extended warranties do pay off once in awhile. it all boils down to several grand out of pocket if everything goes bad or a couple hundred now for a bit of piece of mind.

 

[Chasey_Lane]

State Farm told us not to get it because our full coverage policy covers the loan pay off, no matter the loan total left. :shrug:

That's interesting. Wouldn't SF consider the value of the vehicle and not what is owed on the loan? It's like buying a house -- a lender wouldn't loan you more money than the house is worth, so why would SF pay out more than a vehicle is worth?

SBK -- do you have some sort of "addendum" to your policy?

I'd like Lovin to explain that one (if she doesn't mind).

 

[kwillia]

State Farm told us not to get it because our full coverage policy covers the loan pay off, no matter the loan total left. :shrug:

That's interesting. Wouldn't SF consider the value of the vehicle and not what is owed on the loan? It's like buying a house -- a lender wouldn't loan you more money than the house is worth, so why would SF pay out more than a vehicle is worth?

SBK -- do you have some sort of "addendum" to your policy?

I'd like Lovin to explain that one (if she doesn't mind).

I believe Lovin's previous post addressed this already... and it sounds like it is written in the policy that way so I'm sure the price of the policy covers it as they wouldn't do it for free.

Defintely get the Gap coverage. Or better yet check around for your loan. Several carries offer total debt cancellation for no cost included in the financing. State Farm for one.

I can not tell you how many clients I have seen over the years who have been stuck w/ thousands of $$$ for a vehicle that has been totaled out.

Better safe than sorry

 

[lovinmaryland]

State Farm told us not to get it because our full coverage policy covers the loan pay off, no matter the loan total left. :shrug:

Your auto insurance does not cover GAP so who ever told you that is incorrect. State Farm Auto Loans automatically include Total Debt Cancellation (Their version of Gap) So if you have a loan through State Farm then yes you would be fine. Otherwise no you are not.

GAP insurance is another dealer "incentive" for their salesman to make more money.

Just like extended warranties, and after market warranties, undercoating, rustproofing, paint protection, etc.. etc.. the commission on those sales is HUGE. The ONLY person that benefits from it is the salesman.

Not true at all! The second you drive that car off the lot it decreases in value. Insurance companies are only going to pay what the veh is worth at the time of the crash. NOT what you paid for it.

I have had clients who opted to pass on GAP coverage on brand new veh's to only have someone hit them days later totaling the veh. They were stuck w/ a $2500 difference.

 

[Chasey_Lane]

I believe Lovin's previous post addressed this already... and it sounds like it is written in the policy that way so I'm sure the price of the policy covers it as they wouldn't do it for free.

Aaah, I missed her post. Thanks!!

 

[Softballkid]

Your auto insurance does not cover GAP so who ever told you that is incorrect. State Farm Auto Loans automatically include Total Debt Cancellation (Their version of Gap) So if you have a loan through State Farm then yes you would be fine. Otherwise no you are not.

All I know, is with my motorcycle, SUV, and camper policies, I was told not to worry about gap because if something was totaled, it would be fully taken care of. Camper was totalled in the hurricane, they covered every cent I owed :shrug: Knock on wood, I won't have to find out about the SUV and the motorcycle

 

[itsbob]

GAP Insurance was designed to cover the balance due to the bank after the car insurance policy pays. In many instances, the car dealer will try to sell you GAP insurance and include it on your car note. This is convenient, but you will find it can be quite expensive, plus you end up paying interest on the GAP insurance. It is suggested that you call your insurance agent as in most cases, your insurance agent can offer GAP coverage for a much cheaper price and you won’t have to pay interest on the premiums

Howzat?

 

[kwillia]

Howzat?

Paying for the gap insurance on the car note is the idiotic part simply because you are paying x number of years of interest on that payment. Gap insurance should be purchased directly via your insurance coverage and it can be dropped at any time you chose which allows you to only carry it during the period where your loan and the value of the car meet up again.

 

[SJSWING]

Thank you all for your opinion on if we should get gap or not. We are looking at purchasing a 2012 Focus Hatchback that is used. Unfortunately I have not been able to pull up a Blue book value on that model as it is still considered "new".

I was thinking with the significant amount of money down and the vehicle being driven locally for the most part (besides maybe a trip to dc or baltimore), then the mileage would stay rather low.

It is a younger lady driving the vehicle. She did total her last vehicle. It is something I am really stuck on....with the last vehicle being totaled by insurance I am wanting to jump on board w/ gap insurance.

On the other hand, we are getting the vehicle at a pretty decent price, while the first owner has already taken the hit for driving it off of the lot. I am hesitant due to the fact that there will not be a lot of miles, <20,000 a year, on the vehicle. I guess I will see what the car company says to do when we go back to financing. The salesman seems to be pretty nice and not up our behinds while looking around the lot.