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My credit union offered me GAP insurance for a flat fee of $150 when I bought my last car. Considering the relatively low cost and the peace of mind it provided, I decided to purchase it. Even if the chances of needing it are slim, the potential financial hit of owing thousands on a totaled car made that small investment seem worthwhile.
I once totaled a car and my GAP insurance came in clutch. They not only paid off the remaining loan balance but also gave me back my down payment, which allowed me to get another vehicle. Without GAP, I would have been stuck without a car and still owing a significant amount of money.
I used to work at a bank doing loans, and many people who said yes to GAP at the dealer had no idea what they purchased or if they even needed it. While dealers often mark up the price significantly, you might be able to get GAP through your own auto insurance for around $20 per year. It’s worth checking with your insurance company for a much cheaper option than the dealer’s $700 offer.
As someone who always aims for at least 50% down on a car, I’ve never even considered GAP insurance. With such a substantial down payment, the likelihood of being significantly underwater on your loan is very low, making GAP seem like an unnecessary expense in my situation. However, with your smaller down payment, the situation is different.
From my perspective, if the cost of GAP is only $10 per month, totaling $600 over a 60-month loan, it’s a small price to pay for the potential protection against owing thousands if your car is totaled early in the loan. While you might not use it, the peace of mind of knowing you’re covered in a worst-case scenario can be worth that minimal monthly expense.
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