By David Maillie
You may have already heard of GAP insurance at your local car dealer as it was probably offered to you by the finance manager. Or maybe, unfortunately, you found out about it after it was too late and somebody totaled your car. Maybe your one of the many that don’t know what it is at all. Whatever the case, we are going to discuss GAP insurance here and whether it is a good idea to have and where to purchase it so you don’t get ripped off. GAP insurance is nothing new and has been around for years. It is generally a low cost insurance that covers the difference or gap, hence its name, in the wholesale value and what is actually owed amount. Basically, when an accident occurs, the paying insurance company will only pay for repairs that are less than a certain percentage of the vehicles value (this can vary). Anything above this value and they will just mark the vehicle as totaled and write a check for the wholesale replacement value. Unfortunately, this is where many car owners get hurt.
Do you have cloudy headlight lenses on your car or truck?
Many owners owe far more on their cars then they are worth. Most people don’t know this, but as soon as you drive that new car off the car dealers lot it loses 20% to 40% of its value as it then becomes a used car. Insurance companies are not obligated or required to payout above the wholesale replacement cost in the event the vehicle is totaled (and believe me they won’t pay above this figure).
According to Autoweek, the average gap in coverage for someone with a current auto loan is around $3500 and with a car lease it can be as high as $5000 or more. And in many cases with purchases that involved the rolling over of negative equity, car leases (these can have huge gaps of $5000+), large dealer profits, and expensive dealer aftermarket adds (like $600 paint protection – which is really worth about $5) the gap can be much, much higher. Basically, the higher the gap, the more you need gap insurance in case something happens and your car is deemed a total loss.
Restore cloudy headlights to new again with New Lite headlight cleaner! So, obviously, if you pay cash for your cars you do not need gap insurance even though some unscrupulous car dealers and finance managers will still try and sell it to you – go figure. However, if you are like most people and have a loan or lease on your car or truck and you owe a good bit more than its whole sale or insurance replacement value, then gap insurance is highly recommended. Now with that said, you don’t have to purchase it from your local car dealer – regardless what the finance (aka lie-nance) manager says. The car dealer places a 50% or higher markup on just about everything they offer to you in the finance office (see this article on car dealer scams for more on this). You can easily go online and search Google or Yahoo for GAP insurance and guess what you will find? Thousands of entries offering low cost and discount GAP insurance direct from the insurer for a fraction of what your car dealer charges. In many cases they also offer extras that your car dealer does not like extra theft protection, credit protection, higher rated companies, better customer service, etc… So, if you find that you have a loan on your car and you owe more than the car is worth like most Americans, then gap insurance is a good idea. Just keep in mind, you do not have to purchase it from the car dealer and finance manager at a 50% or higher markup (just add up what they added to you monthly payment and multiply by 60 months or whatever the loan term is and see how much extra they are charging and profiting off of you).
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