Guaranteed Auto Protection, GAP insurance, is a form of insurance you can purchase when you finance a vehicle at a dealership. The purpose of this insurance known as GAP Insurance is to cover the difference or “gap” you owe on your auto loan if your vehicle is totaled or stolen and not recovered.
Your insurance company will value your vehicle based on year and mileage. However, you may owe more on your loan than your car is worth and therefore the insurance company pay out will not cover your debt. There are a variety of reasons for this:
- A portion of your monthly loan payment goes to interest which slows the rate of pay down.
- If you have abnormally high mileage on your vehicle that will lower its value.
- Extending the length of your loan to reduce your monthly payment will also slow how long it takes to pay the loan off.
- When you purchased your vehicle you put little or no money down so the entire cost of the vehicle plus taxes, motor vehicle fees and dealership fees were financed.
The GAP insurance will pay what your car insurance company does not in the event of total loss including your insurance deductible. What Gary LaPointe our finance specialist recommends:
- Purchase GAP insurance is you have a down payment less than 30% of total sale.
- Your finance terms are 48 months or greater.
- GAP insurance purchased from a Dealer will provide more benefits. The same insurance purchased from your auto insurance company will have a deductible. They will also lean toward repairing your car than totaling it.
Remember to discuss GAP insurance at the time you make a purchase to avoid any problems down the road. If you have any questions contact Gary LaPointe at Star Auto Sales in Meriden.