Just bought a new car do I need gap insurance?

Answer 1

It depends on your financial situation and how much you owe. This is going to be long, but it needs to be to give you a clear picture.

I once traded a vehicle I still owed $18K on. The dealer gave me $11K which left $7K outstanding. The vehicle I purchased was $35K after rebates, and I also financed tax, tag and title. All in all, the loan was for $46K. When I did my research, the vehicle was only going to be worth $28K when I drove it off the lot. That was a $18K difference. I was going to be in the hole pretty deep.

Well, normally I wouldn't purchase gap insurance, but considering the value of my vehicle was going to continue to go down, I purchased a $250 gap insurance policy to cover loss, never expecting to have to use it.

Fast forward 1.5 years later...the vehicle was stolen and never recovered. The insurance company only gave me $26K (they messed up and gave me dealer retail. It was actually only worth about $20K) minus a $500 deductible.

I still owed about $42K. The gap insurance paid off the rest plus the deductible. I actually received money back because I was still making payments until the settlement was complete.

I paid $250 for something I thought I'd never have to use and got that back plus some when I had to use it.

I now get gap insurance for any vehicle I buy. I also don't trade-in vehicles when I owe more than they are worth. If the insurance company hadn't paid $6K more than they should have, and I didn't have the $16K from gap insurance, I'd still be trying to pay off that $22K today. That's a new car!!! Oh, and I'd be walking, too.

If you don't have money sitting around to pay the difference on what your car is worth and what you owe in the case of a loss, purchase the insurance.

Answer 2

It's not a bad idea on a new car right off the lot. It depends on the financing terms, down payment, purchase price, make of vehicle, and type (luxury, SUV, compact, etc). If you financed longer than 3 years, it would be a solid idea to get the gap insurance and check after a year or two to see what you still owe vs. what it's worth and consider dropping it if feasible at that time. Check to see how payment would be made if something happened. Some may pay the loan off, some may pay no more than 110% - 125% of the market value of the vehicle (i.e. pay up to $12,500 for a car worth $10,000). It's a good idea to know beforehand in case you tire of the payments and want to push it in the nearest river. Hope that helps.

Answer 3

Yes it is if you owe more on the car then what it is worth or if you can expect the value to go down below what your loan amount is. Basically if you have a $28,000 loan on a brand new car and you put say $5,000 down you would owe $27,500. Once you drive it off the lot the value goes down lets say about 2,000. So now your car is only worth $25,500 and you still owe 27,500 you would have 2,000 dollars of negative equity in the car meanin you own more money then the car is worth. So say that same month you drive it off the lot and get in an accident and your car is tottaled. Well the insurance company will pay for the car but only what it is worth so in this exzample they will pay the $25,500 retail value of car and not the full loan amount of 27,500 which leaves you owing 2,000 dollars to pay out of your pocket. Gap Insurance will cover the $2,000 dollars so you do not have any out of pocket expensises. However dont get it threw the dealerships, you can get in threw your insurance company for like 5 dollars a month. Plus if you get gap threw the dealership and it cost $500 and you get in a wreck one month later your out of that money where if you pay your insurance company the $5 for that month your only out $5. Plus if you cancel gap threw the dealer ship when you car is worth more then you owe you only get some of the money back.

Answer 4

Yes. Gap Insurance simply means that in the unfortunate event of a collision, you are compensated for the full value of your car. Imagine having to make a car payment and yours is sitting totaled in some salvage yard. Many people are having that problem today because the financing allows them to "afford" a car they really shouldn't have. Good idea, good luck!

Answer 5

If you need gap insurance you are paying over the odds for the car. Will the Gap insurance cover you excess as well? check it out but I have recieved the same for my written off car 6 months after purchase as I paid for it less the excess. If the repayments plan is such that you need gap insurance you cant afford the car.

Answer 6

Depends upon how much you put down. Unless you put down at least 30%, you're probably upside-down on your note and gap insurance would be a good idea.

Answer 7

in this day and age, YES