When buying a new car, is GAP insurance optional or required?
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Asked July 6, 2010
When buying a new car, GAP insurance is typically optional, but it may be recommended by the dealership or your lender. GAP insurance stands for Guaranteed Asset Protection, and it covers the difference between what you owe on your car loan and the actual cash value of your car if it's totaled or stolen. When you buy a new car, it immediately starts to depreciate in value, which means that its value may be less than what you owe on your car loan. If your car is totaled or stolen, your insurance company will typically pay you the actual cash value of your car, which may be less than what you still owe on your car loan. This means you could end up owing money on a car that you no longer have. GAP insurance can help cover this difference and protect you from financial loss. While it's not required by law, some lenders or dealerships may require it if you have a high-interest car loan or if you're putting a small down payment on the car. It's important to carefully consider whether or not to purchase GAP insurance when buying a new car. Factors to consider include the amount of your car loan, the length of your loan term, and the rate of depreciation of the car. You may also want to compare the cost of GAP insurance from different providers and decide if it's worth the additional cost for your peace of mind.
Answered July 6, 2010 by Anonymous