While most people have a lot of important questions when purchasing a vehicle - some of the most important questions that can get overlooked is how to best protect your total investment. When you budget for a new or pre-owned vehicle, you should think about whether you have room in that budget for those protections. One big important protection is Gap Insurance. So, what is Gap Insurance and why is it important?
Gap insurance is a type of car insurance that covers the difference between the amount you owe on your car loan and the car's actual cash value (ACV) in the event that your car is totaled or stolen. When you finance a vehicle for over 100% of the trade-in, or wholesale, value of the vehicle; it is important to insure that you won't be on the hook for thousands of dollars should that vehicle get wrecked or stolen.
Here are some benefits of gap insurance:
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It protects you financially: If you have a car loan and your car is totaled or stolen, gap insurance can help you pay off the remaining balance of your loan and prevent you from having to pay out of pocket.
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It can save you money: If you have a car loan with a high interest rate, gap insurance can help you avoid paying hundreds or thousands of dollars in additional interest.
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It can give you peace of mind: Knowing that you have gap insurance can give you peace of mind in case something happens to your car, as it can help protect you from financial hardship.
Overall, gap insurance can provide important financial protection in the event that your car is totaled or stolen, and can help you avoid paying out of pocket or incurring additional debt to pay off your car loan. Typically, the business manager at the dealership will discuss the cost of Gap Insurance. However, it is a great idea to ask your salesperson to show it in your payments up-front. This way, you can make sure you have the total picture of how the payment fits your budget if you feel it would benefit you.
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