@FMC Your auto insurance should pay up to what the car is worth. The GAP should kick in and take care of the rest if you owe more than the car's depreciated value.
PURCHASE THE GAP.
GAP insurance is almost always a good idea. That's why some new and used car loans (NFCU, for example, I believe) include it at no extra charge to their customers.
Many auto manufacturers that have in-house finance companies (like Ford Motor Credit) also offer GAP on new loans for a fee.
Given the depreciation rates for new cars, in particular, you could owe a lot more than your car is worth if it gets totaled. If you don't want to risk that, GAP is an excellent idea! Used car purchases may not warrant GAP insurance unless you're underwater on the car.
@ridgebackpilot wrote:GAP insurance is almost always a good idea. That's why some new and used car loans (NFCU, for example, I believe) include it at no extra charge to their customers.
Many auto manufacturers that have in-house finance companies (like Ford Motor Credit) also offer GAP on new loans for a fee.
Given the depreciation rates for new cars, in particular, you could owe a lot more than your car is worth if it gets totaled. If you don't want to risk that, GAP is an excellent idea! Used car purchases may not warrant GAP insurance unless you're underwater on the car.
GAP isn't always or almost always a good idea. It really depends on the buyer and the value of the purchase.
GAP insurance is literally the gap between the value of vehicle and the remaining balance on the loan.
If you put a lot down the value of the vehicle is likely more than the loan and buying gap just means you are paying interest on a product that will never come into play.
If the total value of the vehicle is such that even totaling it a month later the gap between vehicle value and loan amount is small or doesn't exist it also doesn't make sense.
If you got the vehicle on a good deal well below market, it doesn't make sense.
The only real instance where gap makes sense is if you buy an expensive vehicle with little down and no trade in and even minimal damage is likely to total the vehicle, on a vehicle that depreciates fast.
Not going to say gap is useless but 95% or more will never see a benefit even those that end up totaling their vehicle, and those that do likely paid most of the difference in just buying gap in the first place.
