Auto GAP Insurance
Six Reasons It's A
Must For Your Auto Loan
For customers financing a vehicle, auto GAP Insurance has become more popular than ever and with the values of vehicles changing drastically and sometimes daily it so important for you to know all you can about this financial life saver of a product.
GAP is essentially a stop loss against negative equity and a total loss of your vehicle. There are six situations that I've found where you would benefit most by having this insurance.
[Read: 10 ways to avoid negative equity.]
If you can answer yes to one or more of these questions, then do yourself a favor and consider buying an Auto GAP Insurance policy:
1. Are you putting
less than 25% down?
Take into consideration that on top of the normal vehicle depreciation you will have T,T & L, dealer fees and possibly negative equity included in your financed amount.
Vehicles will almost always depreciate faster than you will pay them off and therefore, a larger down payment helps to reduce your negative equity.
2. Are you rolling
negative equity into your new loan?
If you are rolling over negative equity into your new loan, you'd want to put the negative equity + 25% down.
If not you'll definitely want to consider GAP Insurance.
3. Are you financing
for more than 48 months?
The longer the term you plan to finance, the more valuable GAP Insurance becomes.
4. Will you be
paying finance charges?
Unless you've qualified for 0% or some other very, very low rate, then you should consider GAP Insurance.
Finance charges can add up to thousands of dollars over the course of your loan and will be a large percentage of your monthly payment. Therefore, you will not pay down the principal as quick.
5. Do you drive
over 10,000 miles per year?
The more miles you drive a year the quicker your vehicle will depreciate. This is especially important for very high mile drivers, i.e. 20,000 plus miles per year.
6. Are you buying
a brand new vehicle?
A brand new vehicle will lose 20-30 percent of it's value as soon as you drive it off the lot...Ouch!
To learn more and to read an example of how Auto GAP Insurance protects you follow this link.
