topic Re: GAP ? in Auto Loans

GAP ?

Fico82 — Wed, 03 Jul 2019 23:54:32 GMT

Hey FicoFam! ,

So got a question .. my father just purchased a new truck and i got a question about GAP ins. I know the basic of it but a little unsure about at what point should you have it vs not when it comes to values of your vehicle etc. I think we don't need it but price of truck msrp was 47k after negotiations etc we walked out financing 17k at 5.99%. We are now going to refi at our local credit union for a 2.74% to save on monthly payment and interest but i know there going to ask if we want gap and i just wanted to confirm on what to do .

On my moms example 10 months ago her new vehicle was 26k and we walked out at 19k then did the whole local credit union thing and when they asked about gap we kinda stumbled and took it for the $300. Now looking back at the papers in the fine print it shows that they valued her car at 24k and now im thinking maybe we didn't need it and i made a bad move on that part. So now i just want to be prepared to my fathers transaction.

Thanks in advance !

Re: GAP ?

Jnbmom — Thu, 04 Jul 2019 00:09:15 GMT

@Fico82 wrote:
Hey FicoFam! ,
So got a question .. my father just purchased a new truck and i got a question about GAP ins. I know the basic of it but a little unsure about at what point should you have it vs not when it comes to values of your vehicle etc. I think we don't need it but price of truck msrp was 47k after negotiations etc we walked out financing 17k at 5.99%. We are now going to refi at our local credit union for a 2.74% to save on monthly payment and interest but i know there going to ask if we want gap and i just wanted to confirm on what to do .

On my moms example 10 months ago her new vehicle was 26k and we walked out at 19k then did the whole local credit union thing and when they asked about gap we kinda stumbled and took it for the $300. Now looking back at the papers in the fine print it shows that they valued her car at 24k and now im thinking maybe we didn't need it and i made a bad move on that part. So now i just want to be prepared to my fathers transaction.

Thanks in advance !

If you're financing a vehicle for a dollar amount that's larger than what the vehicle is worth according to blue book, gap ins can be a good idea. However if you are financing the vehicle for less than the car is worth then they say the insurance isn't usually necessary

Re: GAP ?

Shooting-For-800 — Thu, 04 Jul 2019 01:44:28 GMT

Depends on cost, down payment, blue book, and depreciation.

Generally, large down payment means you don’t need GAP.

GAP can be ideal for leasing or trading in upside down.

Re: GAP ?

IPIF — Thu, 04 Jul 2019 11:04:57 GMT

on a new (not pre-owned) car you should have GAP insurance if you pay only a small down payment. The car will depreciate as soon as you drive it off the lot and continue with significant depreciation during the first year. So even if you are not upside down when you buy the car, you can be upside down when you drive it off the lot. But I would not buy it from car dealer or credit union. Many car insurers will sell it to you for a small additional premium. They may call it New Car Replacement insurance.

Re: GAP ?

Anonymous — Thu, 04 Jul 2019 11:24:16 GMT

Owing a few thousand dollars on a car that was stolen or totalled is a very hard pill to swallow.

Get the GAP.

Re: GAP ?

Anonymous — Thu, 04 Jul 2019 21:20:11 GMT

@Fico82 wrote:
Hey FicoFam! ,
So got a question .. my father just purchased a new truck and i got a question about GAP ins. I know the basic of it but a little unsure about at what point should you have it vs not when it comes to values of your vehicle etc. I think we don't need it but price of truck msrp was 47k after negotiations etc we walked out financing 17k at 5.99%. We are now going to refi at our local credit union for a 2.74% to save on monthly payment and interest but i know there going to ask if we want gap and i just wanted to confirm on what to do .

GAP is only necessary if the car is worth less than the remaining principal of the loan. We would need more information such as the Kelley Blue Book value of the vehicle and the loan principal and monthly payment before giving you accurate advice. As an aside, if you purchase GAP insurance and pay off the loan early you will usually get a partial refund.

Re: GAP?

Anonymous — Thu, 04 Jul 2019 21:21:51 GMT

This was a duplicate post

Re: GAP ?

Fico82 — Thu, 04 Jul 2019 22:22:52 GMT

@Anonymous wrote:
@Fico82 wrote:
Hey FicoFam! ,
So got a question .. my father just purchased a new truck and i got a question about GAP ins. I know the basic of it but a little unsure about at what point should you have it vs not when it comes to values of your vehicle etc. I think we don't need it but price of truck msrp was 47k after negotiations etc we walked out financing 17k at 5.99%. We are now going to refi at our local credit union for a 2.74% to save on monthly payment and interest but i know there going to ask if we want gap and i just wanted to confirm on what to do .
GAP is only necessary if the car is worth less than the remaining principal of the loan. We would need more information such as the Kelley Blue Book value of the vehicle and the loan principal and monthly payment before giving you accurate advice. As an aside, if you purchase GAP insurance and pay off the loan early you will usually get a partial refund.

Hey aeroazure ,

Bluebook is 35k Clean trade in 38k Clean Retail.

Loan Principal is $16,600

Payment @ $321 a month 5 year @ 5.99%.

Truck was purchased New off the lot last Saturday. Was the last 2018 on lot.

Im going in this monday to refi at 2.74 % to bring down payment and save on interest. 5 yr term.

So based off your input and others i should be in the clear not needing GAP correct ?

Thanks for everyone help greatly appreciated !

Re: GAP ?

Anonymous — Thu, 04 Jul 2019 22:48:28 GMT

@Fico82 wrote:

Hey aeroazure ,

Bluebook is 35k Clean trade in 38k Clean Retail.

Loan Principal is $16,600

Payment @ $321 a month 5 year @ 5.99%.

Truck was purchased New off the lot last Saturday. Was the last 2018 on lot.

Im going in this monday to refi at 2.74 % to bring down payment and save on interest. 5 yr term.

So based off your input and others i should be in the clear not needing GAP correct ?

Yes, you do NOT need to purchase GAP insurance. The insurance company pays the full value in a total loss, so around $35K. That not only covers your loan principal but gives you a great surplus for a down payment on a replacement vehicle.

Edit: I just wanted to add that I refinanced my auto loan last Feb and they offered GAP insurance. My vehicle is worth around $19k and the loan principal was $15k. I was heavily considering it until I put in some research and figured out what GAP insurance is actually for.

Re: GAP ?

Fico82 — Thu, 04 Jul 2019 23:00:13 GMT

@Anonymous wrote:
@Fico82 wrote:
Hey aeroazure ,
Bluebook is 35k Clean trade in 38k Clean Retail.
Loan Principal is $16,600
Payment @ $321 a month 5 year @ 5.99%.

Truck was purchased New off the lot last Saturday. Was the last 2018 on lot.
Im going in this monday to refi at 2.74 % to bring down payment and save on interest. 5 yr term.

So based off your input and others i should be in the clear not needing GAP correct ?

Yes, you do NOT need to purchase GAP insurance.

Thanks for the conformation .

Re: GAP ?

Anonymous — Sat, 06 Jul 2019 02:19:29 GMT

You have pretty solid amount of equity so i don't think GAP is needed BUT i will say this, if your use of the vehicle is different than average that results in either significantly higher that average yearly use or significant body damage (like a work truck on a farm) then you can still find your self in a bad spot on the loan if you are involved in a total loss as the depreciation from miles and or conditions can take a big chunk out of the value. Just food for thought, only you know how the truck will be used and maintained.

Re: GAP ?

Anonymous — Sat, 06 Jul 2019 03:31:02 GMT

@Anonymous wrote:
You have pretty solid amount of equity so i don't think GAP is needed BUT i will say this, if your use of the vehicle is different than average that results in either significantly higher that average yearly use or significant body damage (like a work truck on a farm) then you can still find your self in a bad spot on the loan if you are involved in a total loss as the depreciation from miles and or conditions can take a big chunk out of the value. Just food for thought, only you know how the truck will be used and maintained.

This is a good point to consider. If you consider depreciation you could end up with less money in a total loss, but your loan principal is low compared to the current value so you should be good.

Re: GAP ?

Anonymous — Sat, 06 Jul 2019 03:49:15 GMT

What he should consider is new car replacement being added to his auto insurance policy. For 5-6 bucks a month I have it with USAA and it adds 20% to the payout for any total loss. This really helps protect you in the event of a loss, especially on a new vehicle because they depreciate so much in the first three years of ownership. I have it on all of my cars and none of them have any negative equity.

Re: GAP ?

Anonymous — Sun, 07 Jul 2019 22:51:31 GMT

@IPIF wrote:
on a new (not pre-owned) car you should have GAP insurance if you pay only a small down payment. The car will depreciate as soon as you drive it off the lot and continue with significant depreciation during the first year. So even if you are not upside down when you buy the car, you can be upside down when you drive it off the lot. But I would not buy it from car dealer or credit union. Many car insurers will sell it to you for a small additional premium. They may call it New Car Replacement insurance.

That's odd, I just purchased new vehicle and the salesman dont bother offering me GAP insurance when my fiananced/loan amount is well below vehicle's retail price. Putting larger down payment helps and if you have another vehicle as trade in would bring down the retail price of the new purchase.