Is Gap Insurance On New Cars Necessary?
Gap insurance was initially used for leased vehicles only, however, the popularity of long-term auto financing also makes it a very necessary investment for drivers who are or can become upside-down in their loan or car trade in value. Here’s why: If the new car is totaled, stolen or damaged beyond repair, your auto insurance covers the vehicle’s current market value. Because new cars depreciate between 20% and 30% the minute you drive them off the lot, if you bought a car priced at $20,000, you’re insurance will give you around $14,000 for it. But the car finance loan still needs to be paid in full and where will the remaining $6,000 (plus interest) come from? Your pocket. Now for the good news. Gap insurance on new cars kicks in precisely in this type of situations and covers the difference between what the insurance company pays you and what is owed to the financing entity. Depending on the policy you purchase, it can be used when the car is totaled, stolen or irreparably damaged be
