2007-05-13 02:50:59 · 5 answers · asked by chocolate_delux96 1 in Cars & Transportation ➔ Insurance & Registration
Since autos depreciate quicker than you can pay them off, most people owe more on their vehicle than the vehicle is worth.
In the event that a vehicle is ; lost (flood or fire), totaled (accident), or stolen (uh, thief)....insurance only pays for the vehicles currant value.
The value is probably much less than the balance on the loan.
GAP insurance covers (or 'bridges') the 'gap' between what is paid (by insurance) & what is owed (by you)
the following link is actually about car loans & inequity.
It is talking about why long term loans hurt the auto business.
But if you read the statistical facts (in the article) about 'negative equity' , You will understand how LONG it takes for you to come to a 'leveling off' balance.
http://www.chicagotribune.com/business/chi-070513autodebt-story,0,6104423,print.story?coll=chi-bizfront-hed
2007-05-13 07:05:04 · answer #1 · answered by Vicky 7 · 2⤊ 0⤋
Gap Insurance is when you have a car that you pay like 20,000 grand for, but say it's only worth 5,000 and it gets totaled in an accident. The insurance would only give you 5,000 as that is what the car is worth. Gap Insurance would pick up the other 15,000 you owe left on your lease so you dont have to pay that out of pocket.
2007-05-13 09:54:53 · answer #2 · answered by chasandjayg 2 · 0⤊ 0⤋
If you have a loan, and owe more for your car, then the car is actually worth, you need to carry "gap" insurance to cover the difference between blue book/market value of your car, and what you really owe on the car.
2007-05-13 18:38:05 · answer #3 · answered by fisherwoman 6 · 0⤊ 0⤋
If you have a lienholder and your vehicle gets totalled. If the fair market value of your vehicle is less than the amount you still owe on it - GAP insurance will cover the difference. It's worth it if - in the case your vehicle does get totalled and you owe more/much more than what it's worth - you have an outlet to have someone pay for it, rather than trying to scrounge for a way to pay for the rest of the vehicle AND have to buy another one.
2007-05-13 13:14:49 · answer #4 · answered by S17V 4 · 0⤊ 0⤋
it is a great idea for the investment,i got really screwed a few years ago when my car got totalled and had to pay off the balance without being able to even drive the car.belive me it sucked!!!
2007-05-13 10:05:40 · answer #5 · answered by luv2speed 1 · 0⤊ 0⤋