| What is GAP Insurance? | | | | friends and without you even knowing it, you've just |
| GAP Insurance, also referred to as GAP Waiver or | | | | lost 20-30% of the value of your vehicle. That's typical |
| GAP Addendum, is an abbreviation for Guaranteed | | | | depreciation for the first year of a new vehicle, you |
| Asset Protection. In the event your insurance company | | | | can expect another 15-20% in the second year and |
| declares your vehicle a total loss from accident or | | | | 10-15% in your third year. So immediately your vehicle |
| theft GAP Insurance will pay the difference between | | | | is now only worth, let's use the 20% from above, |
| the ACV (Actual Cash Value) your insurance | | | | $24,000 and you owe $32,250. |
| company determines they will pay and what is owed | | | | One year after buying your vehicle, using the same |
| to the bank on your vehicle. An easier way to explain | | | | figures above, your vehicle is stolen and the insurance |
| this is that GAP Insurance will pay your negative equity | | | | company has given up on finding it and declares it a |
| (difference between your vehicles ACV and what is | | | | total loss. You've been able to pay down your loan to |
| owed to the bank) so that you are not responsible to | | | | $31,000, but it's only worth $24,000, which leaves you |
| pay the bank, potentially thousands of dollars, on a | | | | with a $7,000 GAP plus your deductible, let's say $500. |
| vehicle you are no longer able to drive. Most GAP | | | | The total amount that you are now required to pay |
| Insurance companies will also cover your insurance | | | | the bank and your insurance company is $7,500. That's |
| deductible and may give you additional money to use | | | | right you have to come out of pocket to pay a |
| as a down payment on a new vehicle. | | | | balance on a vehicle you can't even drive anymore. |
| Who needs GAP Insurance? | | | | OUCH! |
| Anyone that: | | | | What happens if you can't pay, or even refuse to |
| - Has put less than 20-30% down. | | | | pay? Eventually the bank will send your account to |
| - Is financing for more than 36 months. | | | | collections and then the account will eventually be |
| - Is rolling over negative equity from a trade in. | | | | charged off. What does this look like to future lenders? |
| - Is buying a new vehicle, especially a truck of SUV, | | | | It will show as a charged off auto loan and will look as |
| due to a huge immediate depreciation. | | | | bad as a repossession on your credit. |
| - Drives over 12,000 miles per year. Due to | | | | Be sure to check with your insurance company and |
| accelerated depreciation. | | | | know what they will and will not cover. If you assume |
| Example of the benefits: | | | | your covered, when you are not, and the worst |
| You've just purchased a brand new vehicle for | | | | happens, you are going to be in for a rude awakening. |
| $30,000 with no money down. With TT & L | | | | GAP Insurance should be available at most any car |
| included you are financing $32,250. You drive your | | | | dealership throughout the country. |
| new vehicle off the lot to show to all your family and | | | | |