You may have heard of gap insurance in the past and now you’re wondering if it’s something that you will need the next time you purchase a car. Gap protection is intended to cover any differences between your car’s value and the amount that you owe on your auto loan. Read on to learn more about gap insurance and whether or not it’s right for you.
When you purchase a vehicle, you will be required to have a regular auto insurance plan. Auto insurance protects you in the event your car is damaged or stolen. Auto insurance will cover all or part of the costs of any repairs that you need after you’ve been in an accident, or if your car is damaged for other reasons. However, in the event that the damage to your car is beyond repair, your auto insurance company may declare your vehicle as totaled. Depending on what coverage you have, your insurance company will typically pay you for the current value of your car at the time of the incident.
If there is a difference between what your car was valued at and what you actually owe on your vehicle, you will still have to continue paying your auto loan, even though you no longer have use of your car. For most drivers, this is a huge financial burden. That’s where gap insurance comes in. Gap insurance asks as balance cancellation agreement that will effectively void any difference owed between the value of your vehicle and what is owed on your car loan.
Negative equity is the term used when a vehicle’s value is less than that which is owed on the car. If you know that you will be “upside down” on your vehicle loan for a substantial amount of time, then gap insurance may be something to consider. There may be many reasons why a car owner might find themselves upside down on their loan. New cars depreciate very quickly in the first year, so it’s not uncommon for new car owners to be upside down on their loan for a time. Other reasons you may be upside down on your loan include leaving little to no money down, or if you have a particularly high-interest rate.
One way to avoid the need for gap insurance is to ensure that you don’t overpay for your vehicle. An over-priced vehicle or bad financing package can quickly cause you to become upside on your car loan. At Credit Country, we offer the largest number of high-quality used vehicles at prices that you can afford. Plus, we have great in-house financing packages, which means you don’t have to go to the bank to get a high-interest auto loan. Our team members are dedicated to helping all of our customers find a great vehicle that fits comfortably in their budget. Visit our dealership today and browse our extensive selection of cars, trucks, and SUVs for yourself. We look forward to serving you!