It’s an insurance that helps protect you when you buy a brand new or newer vehicle.
As they say the moment you drive off the car lot your brand-new vehicle losses value.
A great common question we’re asked: Do you mean that my auto insurance won’t just pay off my loan amount for my new car if something happens? Yes, that’s right and it’s best to know this now instead of after an accident occurs.
Why doesn’t my auto insurance company pay off the value of my car loan? The auto insurance company does not look at your auto loan amount to determine the value of your vehicle and as we all know it’s very common to be “upside down” for the first few years.
Why would I be “upside down”: There are several reasons why and here are a few:
*You didn’t put down a down payment of at least 20%.
* You financed the vehicle for a term greater than 60 months. New vehicles are expensive so to get your payment amount in your comfort zone you may have a 72- or 84-month finance period.
* You rolled over negative equity from your old vehicle
* You have a high interest rate on your car loan
How do I purchase Gap Insurance and how expensive is it? You can purchase gap insurance with your car loan. Typically, the finance person will offer it and please note that a lot of times it’s negotiable so don’t take the first number they quote you. You can also add it on to your auto insurance but there are restrictions so it’s important that you ask questions. There are times that it will pay off most of the loan but it can leave you with a balance due still. There are also restrictions such as-you must be the 1st buyer and the car must be one year or newer. You may still need gap insurance if your car is a year or two old so asking the finance company for information is something, we highly recommended.
If you have any questions or concerns please let us know or ask your Agent for help!