When you buy or lease a new car or truck, it starts to lose value the moment you drive off the lot, with most cars depreciating around 20 percent within the first year. Standard auto insurance policies cover only the current market value of your car at the time of a claim. This means that if you financed your vehicle with a small down payment, the balance on your loan may exceed your car’s market value in its early years of ownership.
In the unfortunate event of a serious accident where your car is totaled, GAP insurance steps in to cover the difference between your vehicle’s depreciated value (which your standard insurance will cover) and the amount you still owe on the loan.
When Should You Consider GAP Insurance?
GAP insurance is often a wise choice if you:
- Made less than a 20 percent down payment
- Financed your car for 60 months or longer
- Leased your vehicle (in which case, GAP insurance is often required)
- Bought a vehicle that depreciates faster than average
- Rolled over negative equity from an old loan into your new car loan
Where Can You Get GAP Insurance?
While dealerships commonly offer GAP insurance, many drivers find it beneficial to explore options through their auto insurance provider. If you’d like to learn more about whether GAP insurance is a good fit for your situation, reach out to us at Barber Insurance Agency. We’re here to make sure you have the right coverage to protect your financial investment.