Hello, I am potentially about to purchase an expensive car. I plan on putting down about 50%, loaning the remaining 50%, 36 month term. $70k car. Loaning 35k.
This car has already done its fair share of depreciation and with the massive downpayment and short loan term I will not be under water at any point on the loan.
If I get GAP insurance, it pays off the remaining loan balance, so say 20k is left and I get t boned by someone. Let’s assume the car is valued at 65k at this point. Does GAP pay out the remaining 20k I owe and THEN I also get paid out the 65k the car is worth?
Thanks!
Question about auto GAP insurance
byu/slamgeareatrear inInsurance
Posted by slamgeareatrear
5 Comments
Gap only comes into play if the acv of the car won’t pay off the loan. Gap wouldn’t help you at all in that situation.
GAP covers the remaining loan balance AFTER insurance pays the actual cash value of the car. It’s designed for those who may be underwater on their loan, not for those sitting at 50% equity.
Assuming the numbers you stated are correct and that there’s no real possibility the car’s value would plummet, GAP is not something you would need.
So if the car is worth $35K, the carrier would pay up to $35K to the lender to pay down/off the loan balance. If the loan balance exceeds the insurance payout, then GAP would cover the difference (subject to some limitations), or else you would have to cover it.
No. Gap pays the delta between the vehicle’s ACV (actual cash value) and the outstanding loan balance, IF and only IF, the outstanding loan balance isn’t covered by the ACV payment on the claim.
I.e. 50k ACV, 60k remaining owed on the loan, collision or liability insurance pays ACV minus any deductible owed, then GAP would pay the 10K difference to satisfy the bank loan. Deductible would still be the responsibility of the policy holder, if applicable, not GAP.
In your situation, unless the vehicle depreciated at a scary rate, putting 50% down pretty much moots a need for GAP.
No. GAP only kicks in when the car is a total loss and the first insurance payment (for the value of the car) isn’t enough to pay off your car loan. You will never get extra money back if your GAP coverage is kicking in. GAP kicks in AFTER your main insurance payout….not before.
In your case, with your down payment….you shouldn’t ever be underwater on this loan. So GAP makes no sense for you here.
Thanks everyone for clearing it up!