What Causes The GAP In Insurance Coverage?
• Unless you pay cash for your new car, or make a substantial down payment, there is a possibility your vehicle loan could be “upside down” the minute you drive off the dealer’s lot. An “upside down” loan means the amount borrowed exceeds the value of the asset itself. The value of a vehicle at any point in its life is predetermined by a depreciation schedule that takes into account make, model, year, equipment, and mileage. • Often, borrowers find themselves “upside down” through a combination of factors, including: • Taking out a loan with an extended term – A longer loan term not only means lower payments, it means you build equity in the vehicle much more slowly. • Depreciation – All vehicles depreciate, but some lose value much more quickly than others do. According to some estimates, certain vehicles lose as much as 30% of their value within the first three months. • Putting little or no money down – If you finance all or nearly all the price of a vehicle, because of depreciation
