Just bought a new car? What if an accident occurred soon after taking your brand new ride off the lot? You have full coverage insurance, right? So, you're covered... or maybe not.
When you drive your new car off the lot the value of your vehicle plummets, sometimes as much as 20%-30%. Say for instance you pay $25,000 for your new vehicle and have an accident a month later. You probably have only made at the most one payment and if you did not put any money down your loan amount is still close to the $25,000 purchase price. Unfortunately, even with full coverage, which includes comprehensive and collision, you will only receive the market value of your vehicle which could be as much as 20%-30% lower than the purchase price. That means you may be stuck paying that 20%-30%. On a $25,000 car, just a 20% depreciation would be $5,000! That amount could be more if you financed your taxes and license into your loan.
GAP stands for Guaranteed Auto Protection. Most people just use the term GAP to represent the gap in coverage between how much one owes on a car and how much the car is worth. GAP insurance is necessary in almost all cases and is relatively low cost. GAP insurance is a must if you are buying or leasing a new vehicle and should not be something that you decided to skip to cut costs.
Fortunately, you may already have GAP insurance with your current insurer, which would insure you for the difference between your loan amount on the car and the actual market value of the car. But, not all insurance companies offer GAP insurance.
In some cases GAP insurance is not available from your insurance company. So, what do you do? Of course the dealership will probably be able to offer you GAP insurance. If GAP insurance is not available from the dealership then you can purchase it from an online GAP insurance company. Just do an online search for GAP insurance and you will find many companies available.