You’re at the car dealership with your Auto Advisor in Miami, ready to sign papers and they ask you if you would like to add Guaranteed Asset Protection (GAP). You’ve heard people talk about it in the past, but aren’t completely sure what it is. So, what do you do?
To make you feel more comfortable about your decision, let’s take a look at what GAP really is and if it’s worth the investment:
Taking a look at GAP in South Florida
What is GAP?
Without getting too technical. It’s an optional protection plan that helps to cover the amount you owe after insurance has paid on your auto loan if your car has been totaled.
How does GAP work on credit union auto loan?
Say you paid a sticker price of $24,000 for your car and once taxes and fees are applied, your grand total comes out to $26,500. There’s always a chance of experiencing an accident or theft, so what do you do when this happens? Once you put in a claim with your insurance, they estimate the total value of your car to be $19,200. In this instance say the deductible is $500, once that is taken out your insurance company pays out $18,700 to cover the cost of the car. You still owe $23,500 on the loan, which between the insurance and what you owe caused a $4,800 gap. This is where GAP comes in, so you aren’t what they call “upside down.”
When Should I Purchase GAP?
You don’t have to buy it immediately when purchasing a vehicle, however you never know what may happen so purchasing it as soon as possible is ideal.
Should I buy it at the dealership?
Typically, buying GAP at the dealership is more expensive. You can purchase GAP through your credit union which typically offers lower prices.
Can I add it to a lease or buy?
A common misconception is that GAP is only for leased vehicles, but this is not true. You can add GAP to a car you buy, however in most situations it is more preferred for new cars. The most common instances in which GAP would be added onto a used car is if the driver, drives more than 15,000 miles a year or is financing less than 80% of the car’s value.
We recommend getting GAP as soon as possible. You never know what can happen, so it’s always best to spend the extra couple dollars to be safe rather than sorry!
While working with an Auto Advisor in Miami, be sure to ask about the different options when it comes to GAP. If you haven’t gotten preapproved see how a credit union auto loan could help you save and eliminate all the hassle.