If you finance a car with a high rate of depreciation, you can benefit from purchasing gap insurance.
If your down payment was less than 20%, you may owe more than your car is worth.
If your car is totaled or stolen, gap insurance can help you pay off the balance of the loan.
What is gap insurance on a car loan?
GAP insurance is the difference between the actual cash value of a vehicle and the balance still owed on the financing (car loan, lease, etc.). GAP coverage is mainly used on new and used small vehicles (cars and trucks) and heavy trucks. Most auto insurance companies offer this coverage to consumers.
How Does Gap Insurance work if your car is totaled?
What is Gap Insurance and How Does it Work? Gap insurance is an optional car insurance coverage that helps pay off your auto loan if your car is totaled or stolen and you owe more than the car’s depreciated value. This type of coverage is only available if you’re the original loan- or leaseholder on a new vehicle.
Do I need gap insurance on a new car?
You don’t need to consider gap protection if, during your loan term or lease, you will not owe more than your car is worth. And some auto insurance policies include gap protection as part of their standard coverage.
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