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I’m about to finance a new car for $30,000, and the dealer is pushing GAP insurance on me for $700. They say if my car gets totaled, my regular insurance might not cover what I still owe on the loan, and GAP would pay the difference. I’m putting $5,000 down, so my loan will be for $25,000. With the car losing value the second I drive it off the lot, I’m wondering if this extra insurance is really worth the cost. What are your experiences?
From my perspective, if the cost of GAP is only $10 per month, totaling $600 over a 60-month loan, it’s a small price to pay for the potential protection against owing thousands if your car is totaled early in the loan. While you might not use it, the peace of mind of knowing you’re covered in a worst-case scenario can be worth that minimal monthly expense.
As someone who always aims for at least 50% down on a car, I’ve never even considered GAP insurance. With such a substantial down payment, the likelihood of being significantly underwater on your loan is very low, making GAP seem like an unnecessary expense in my situation. However, with your smaller down payment, the situation is different.
I used to work at a bank doing loans, and many people who said yes to GAP at the dealer had no idea what they purchased or if they even needed it. While dealers often mark up the price significantly, you might be able to get GAP through your own auto insurance for around $20 per year. It’s worth checking with your insurance company for a much cheaper option than the dealer’s $700 offer.
I once totaled a car and my GAP insurance came in clutch. They not only paid off the remaining loan balance but also gave me back my down payment, which allowed me to get another vehicle. Without GAP, I would have been stuck without a car and still owing a significant amount of money.
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