cancel
Showing results for 
Search instead for 
Did you mean: 

Gap insurance - do I need it?

electra
Established Contributor

Gap insurance - do I need it?

Hopefully will be picking up my new Audi this week.  I have pre-approved loan from NFCU.  They offered me Gap insurance but I declined as I wasn't sure it was necessary in my case.   Looking for advice.

 

The car will be about $50,000 and I am giving a down payment of $17-18k.  As I understand it the point of Gap insurance is to cover the difference between what is owed on a loan and the car value as assessed by the insurance company in the case that your car is totaled. Correct? If this is the case, then I'm assuming with a substantial down such as I'm giving negates the need for Gap insurance?



Starting Score: TU:584 | EQ 584
Current Score: TU FICO: 685 | EQ FICO 695 | EX 687
Goal Score: 780 across the board


Take the FICO Fitness Challenge
Message 1 of 8
7 REPLIES 7
C7LT1
New Contributor

Re: Gap insurance - do I need it?

You are correct on both points. With a 17k downpayment there is no need for gap. If you want to run the numbers just use NADA.com to lookup the value of your car and compare that number to your loan amount. This will let you determine if you need gap or not.

 

Last car I purchased was $5000 under market value so I passed on GAP. Even with with TTL and 100k bumper to bumper warranty I was stiill 3k under market value.

In the garden until June 2018

Message 2 of 8
webhopper
Moderator Emeritus

Re: Gap insurance - do I need it?


@electra wrote:

Hopefully will be picking up my new Audi this week.  I have pre-approved loan from NFCU.  They offered me Gap insurance but I declined as I wasn't sure it was necessary in my case.   Looking for advice.

 

The car will be about $50,000 and I am giving a down payment of $17-18k.  As I understand it the point of Gap insurance is to cover the difference between what is owed on a loan and the car value as assessed by the insurance company in the case that your car is totaled. Correct? If this is the case, then I'm assuming with a substantial down such as I'm giving negates the need for Gap insurance?


You are correct.  I also bought a expensive car, we put down close to 8k and paid for TTL out of pocket.  We also chose to avoid GAP insurance, but we have comp / collision / Liability / Uninsured Motorist / etc at the max coverages through State Farm for all of our cars.  


Starting Score: 08/29/2011 TU 671 EQ 674
Current Score: TU 676 EQ 676 EX 676
Filed Chapter 13 on 06/01/2017 after job loss.

Goal: FHA Construction Loan

Take the myFICO Fitness Challenge
Message 3 of 8
Dustink
Valued Contributor

Re: Gap insurance - do I need it?

Also keep in mind that you can negotiate with your car insurance in the case of a total loss. You can generally upgrade after a total loss. 

 

It is not just the down payment that keeps you out of negative equity. It is about how good of a deal you can get on the car. If you walk in and pay the first number the dealer gives you with all of their extras. Even a large down payment may not be enough. Just make sure you get a smoking deal on the car and with that down payment you will be fine without gap.

 

Also go with the shortest term you can afford. Do not get a 72 month loan.

 

 

Too many INQs & low AAoA so I'm off to tend the Garden.     Age:23    


     $17k       $8.5K          Closed          $19k      $6.5k        $24.2k        Closed         $5k       Closed     $8.5k        Closed      @2.49%
Message 4 of 8
electra
Established Contributor

Re: Gap insurance - do I need it?

Thanks everyone! Smiley Happy



Starting Score: TU:584 | EQ 584
Current Score: TU FICO: 685 | EQ FICO 695 | EX 687
Goal Score: 780 across the board


Take the FICO Fitness Challenge
Message 5 of 8
beenjammin
Valued Member

Re: Gap insurance - do I need it?

Which of the 4 NADA values does the insurance company use when determining a total loss? Or do they use some proprietory system and number?

Message 6 of 8
mtrsprt
Frequent Contributor

Re: Gap insurance - do I need it?


@beenjammin wrote:

Which of the 4 NADA values does the insurance company use when determining a total loss? Or do they use some proprietory system and number?


They go by retail value.  


Starting Score: 521 TU, 597 EQ, 574 EX on 6/20/2011
Current Score: 753 TU, 764 EQ, 766 EX on 02/17/2014
Goal Score: 720-740 Across the board


Take the FICO Fitness Challenge
Message 7 of 8
Dustink
Valued Contributor

Re: Gap insurance - do I need it?


@mtrsprt wrote:

@beenjammin wrote:

Which of the 4 NADA values does the insurance company use when determining a total loss? Or do they use some proprietory system and number?


They go by retail value.  


Not always. Fair market value is not always retail value. It is not the insurance companies responsibility to pay a salesmen and car dealers overhead. They are responsible only to provide the funds needed to get you into a comparable vehicle. You have to be the one to negotiate for retail value or they will do their best to get you to accept the lowest amount possible. 

Too many INQs & low AAoA so I'm off to tend the Garden.     Age:23    


     $17k       $8.5K          Closed          $19k      $6.5k        $24.2k        Closed         $5k       Closed     $8.5k        Closed      @2.49%
Message 8 of 8
Advertiser Disclosure: The offers that appear on this site are from third party advertisers from whom FICO receives compensation.