MrScottly
Well-known member
So, if you've ever financed a vehicle, chances are the F&I person tried to sell you GAP/Debt Cancellation on your loan. Most know what it is, but to review...
If you finance a car there is a chance that during the term of the loan, you may owe more on it than it is worth. If you are rolling over negative equity from your old car, or you purchase with zero money down, you probably owe more than it's worth from day one...And will likely stay that way until you are at least 4 years into the loan, or you make extra payments.
So what happens if you crash it, it gets stolen, a tornado hits it, it gets flooded, or???? Your primary insurance (State Farm, Allstate, Farmers, Geico, USAA, etc) will pay on the loss. The amount they pay is the retail value (replacement value) of the car. This isn't trade-in value (which is lower). It's what someone could reasonably pay for that make/model/trim level car with similar miles and in similar condition. It's based on published numbers from KBB, NADA, Black Book, Edmunds, etc. The primary insurance companies have very strong resources to support the amounts they pay out. What they pay, is what they are going to pay.
So what about the difference between what you OWE and what they PAY? That's generally referred to the GAP. GAP insurance is designed to pay that difference.
BUT!!!!!!!! There are limitations. What they WON'T pay are late payments you haven't made....or payments that have been deferred by the finance company....or the additional interest that's accrued when you were granted that payment extension.
They also won't pay if they find anything illegal on your part...Like getting your brother-in-law to steal it and dump it into the lake when you can't make the payments on it.
If you lease it, they will cancel your remaining debt....Again, conditions apply....
READ THE CONTRACT BEFORE YOU BUY IT!! Unlike service contracts(see my post on that), GAP/Debt Cancellation contracts are marked-up to SEVERAL times the dealer cost when they are sold. The typical dealer net cost on these contracts is between $150-$170, but the typical dealer retail on these is $899. Negotiate it, just like you negotiate the rest of the deal.
Or...You could just buy the GAP coverage offered by the primary insurance companies. Most of them sell it for about $50 annual, and is just a bump to your monthly insurance payment. Many don't realize that...
If you have any questions, just ask....
If you finance a car there is a chance that during the term of the loan, you may owe more on it than it is worth. If you are rolling over negative equity from your old car, or you purchase with zero money down, you probably owe more than it's worth from day one...And will likely stay that way until you are at least 4 years into the loan, or you make extra payments.
So what happens if you crash it, it gets stolen, a tornado hits it, it gets flooded, or???? Your primary insurance (State Farm, Allstate, Farmers, Geico, USAA, etc) will pay on the loss. The amount they pay is the retail value (replacement value) of the car. This isn't trade-in value (which is lower). It's what someone could reasonably pay for that make/model/trim level car with similar miles and in similar condition. It's based on published numbers from KBB, NADA, Black Book, Edmunds, etc. The primary insurance companies have very strong resources to support the amounts they pay out. What they pay, is what they are going to pay.
So what about the difference between what you OWE and what they PAY? That's generally referred to the GAP. GAP insurance is designed to pay that difference.
BUT!!!!!!!! There are limitations. What they WON'T pay are late payments you haven't made....or payments that have been deferred by the finance company....or the additional interest that's accrued when you were granted that payment extension.
They also won't pay if they find anything illegal on your part...Like getting your brother-in-law to steal it and dump it into the lake when you can't make the payments on it.
If you lease it, they will cancel your remaining debt....Again, conditions apply....
READ THE CONTRACT BEFORE YOU BUY IT!! Unlike service contracts(see my post on that), GAP/Debt Cancellation contracts are marked-up to SEVERAL times the dealer cost when they are sold. The typical dealer net cost on these contracts is between $150-$170, but the typical dealer retail on these is $899. Negotiate it, just like you negotiate the rest of the deal.
Or...You could just buy the GAP coverage offered by the primary insurance companies. Most of them sell it for about $50 annual, and is just a bump to your monthly insurance payment. Many don't realize that...
If you have any questions, just ask....
