Gap Insurance

kinley

Some allow it to be endorsed onto the car policy like Towing. Some allow it to be added to the lease agreement. Some the loan agreement. It's not that hard to get.

dtwleungnyc

Some leasing company includes the gap insurance into the leasing contract. If not, when you get your car insurance, your insurance agent should had asked you whether you are financing or leasing the vehicle. Then they will contact the leasing company or the dealership to get the car info. At that point, a responsible agent should/would advise you about gap insurance. BUT, the ultimate responsiblity lies in you, the car owner whether to get it or not. Sorry to hear what happened to you.

paulsr

kinley

The insurance company/agent/representative knows the vehicle is being leased because the lessor is named in the application and on the policy. As the agent/company rep failed to provide GAP as a reasonable coverage under the circumstances an Errors and Omission claim should be filed against the company/agent/representative. Because the deductible (retention) is more than the loss there will be a bit of negotiation expected. Hang tough and hard. Small Claims Court could be a venue for you.

scotlow

I was just about to sign a new 06-530i lease for 36 mos. I got a good deal. I wanted to keep the monthly payment as low as possible. My company allocated $7500 to me to use as upfront cost and I used my trade-in $5000 allowance (Dealer buys car and gives me a check) to get to a total of $12,500 down payment.

I was almost ready to sign the deal when I got a call from my finance buddy who called me an idiot for putting ANY money down other than min requirred. (Sec, acq, fees)

Don't ask why I wanted to put the $7500 company allownce down, it was by itself a sound decision based on tax benefits.

HOWEVER, here is the question.

If the car gets totaled or stolen and there is a complete loss, won't I lose all the money I put down?

My insurance and the Gap insurance in the Acq fee take care of the leasing company but I get screwed unless the loss happens in the last month.

Am I missing something? If the loss happens a few months into the lease, what is available to protect my $12,500 down payment?

I realize putting the whole 12,500 is a monthly benefit to me inthe amount of $347 as far as lowering my monthly payment. So if the loss happens in month 2, I loss the 12,500 less (2 X 347).

Won't the leasing company make out on a total loss under these parameters?

dl7265

While I agree I would not put anything down on a lease. If its insured and has gap even, why would one "loose " . I don't see the difference in a purchase and lease insurance. I called my agent to ask and the only difference is some leases require more coverage then some have, example.100k /200k/100k.

DL

kyfdx

Well, if your company gives you $7500 for upfront costs, and you have to use it or lose it, then I would certainly put that money down... However, I surely wouldn't put any of my own money in the deal.

Your assessment is correct.. Lease downpayments are basically forfeited, if the car is totaled or stolen during the lease.. The GAP insurance makes sure that the owner of the car (the bank) is paid off, but usually does nothing for you..

In the case of a very large downpayment, the ACV of the car may be more than the payoff, and there may be some money that comes back to you... but, in that case, the GAP insurance isn't an issue, and you are still likely to lose a large chunk of cash...

The bank will be covered under a total loss, but won't likely ever come out ahead.

regards,
kyfdx

kyfdx

Example: A brand new '06 530i with an MSRP of $50K...

Let's say our hypothetical buyer is a bad negotiator, and only gets $1000 off MSRP.. Once he rolls in the acq.fee and some other garbage, his gross cap cost is $50K, and the residual is $30K. Instead of putting nothing down and having a payment of $755, our buyer makes a $5K cap cost reduction, resulting in a net cap cost of $45K.. thus lowering his payment to $605.

Three months later, his "used" '06 530i is stolen... The lease balance is $43,250.. The insurance company says the actual cash value of a used '06 530i is $43K (pick any number here). The GAP insurance kicks in the extra $250 to payoff the lease company, and the lessee has spent a grand total of $6815 to lease a car for 3 months...

If he had made no cap cost reduction, the payoff would have been about $48,300.. the GAP insurance would have kicked in the $5300 difference to the bank, and his total to lease the car for 3 months would have just been the 3 payments of $755, or $2265.. His loss attributable to making the cap cost reduction would be $4550...

regards,
kyfdx

scotlow

Your numbers can't be right. Try using a larger down payment. The bank has to make out if they don't return some money to the leasee.

When you put 12.5K down, the bank has that much LESS at risk. However, the car is still valued the same. The insurance company of the leasee would cover what it would cost to replace the car new less a depreciation factor. This has to be an amount that would exceed what the bank put up and had at risk.

Also, if no money was placed down, the insurance company would do the same deal and because of depreciation, the bank may lose. That is when the gap insurance would make up the difference.

There has to be something that exist to protect the leasee who puts down a large downpayment.

PP 49000
Down 12,000
Tot Cap 37000 (this is what bank/finance company gives to car dealer)

36 months
450/month
COMPLETE LOSS month 3

Leasee would have paid approx 13,350 (12,000 + 1350 )

Leasee insurance company replaces car for 49000 les 3 month depriciation of about 4000. Bank/Lease company get check from leasee insur company for 45000. The insurance company would have to cover atleast this amount. The bank only had a total of 37000 in the car. Any loss of lease payments would be made up by the gap insur. Therefore, the bank ends up with 8000 more than what they put up.

Should'nt the bank send the 8000 back to the leasee? Or, can/should the leasee sue the bank for this amount?

dl7265

Exactally, why would said bank keep my 8k ? Or better yet when I recieve my insurance check, that has to be endorsed by the finance company after the payoff,I should get the remaining amount.

DL

Kirstie_H

Have a question about gap insurance? Post it here!

kyfdx

One quick reply.. as I'm not likely to follow the GAP insurance thread..

True, if the ACV of the car exceeds the payoff, then the lessee may receive the overage... But, the lessee doesn't own the car, and has no financial interest in it.. The bank only cares about getting the payoff.. So, no incentive for the bank to wring the best possible settlement out of the insurance company..

There is nothing in the lease paperwork that says you are entitled to any of your downpayment back..

Plus, in this scenario, GAP insurance doesn't enter the picture.. GAP insurance only covers a shortfall in the payoff to the lease company.. No shortfall, no claim on the GAP insurance..

Using a $12K downpayment in my example above? If the ACV of the car is $43K, and the payoff is $37K, then you'll still have spent the same $6800 to lease the car for three months.. Even if they return the $6K difference to you (which is not a given), you are still out the same amount..

It is analogous to trading your car in after only owning it three months.. How much do you think you'll lose? By not making a cap cost reduction, you don't have to worry about it... GAP insurance will make up any shortfall.

regards,
kyfdx

kyfdx

You won't get the check from your insurance company.. Your name is not on the title...

Kirstie_H

CarMan@Edmunds

Hi scotlow. I always advise consumers against making any sort of down payment when leasing. I do so for two main reasons. The first is if your vehicle is totaled in an accident or stolen during your lease, your insurance company pays off the bank that you were leasing it through and your down payment essentially disappears. The second main reason is that down payments on leased vehicles do nothing to reduce their lease-end purchase prices. So your lease-end purchase option price for the BMW that you are leasing would be exactly the same, regardless of whether you had put $12,500 down, or had made absolutely no down payment at all.

Car_man
Host
Smart Shopper Forum

scotlow

Agreed cat_man.

However, I said I was primarily putting down so much becasue of a onetime tax benefit related to the down payment my company is providing. If I keep it and draw from it monthly, I will take a tax hit that will only reduce the overall benefit.

If not for this tax benefit, I'd not consider putting a penny more than the standard amount.

audia8q

here is the rule of thumb I like to follow on GAP....This is what I tell my friends and family who are financing.

If your are financing longer than 36 months and have less than 30% down plus sales tax you probably need GAP......of course there are exceptions to everything but this has been a good guide for us.

Like Terry mentioned earlier, it's a small price to pay for the protection of being forced to pay out $$$$ when you may need it the most.

mrlizzzard

gap insurance-buy it

cadillacmike

Or better yet get it included "FREE" with your lender :P

rickvh

If you get gap, find out exactly what it is and what the Insurance company pays.

I've read a few of them and I wont name companies but one I read for a very popular carrier: GAP = Wholesale bluebook + 25%

So gap isnt always what you think it is, meaning cover your loan amount. The best place to buy gap coverage is when you get the loan. But always read what your buying when it comes to gap, because there is no firm definition of that coverage.

cadillacmike

Mine is quite simple and is included with my loan:

It is the greater of ACV or (loan balance minus deductible).

Kirstie_H

Gap Insurance — Peace of Mind When You Lease
http://www.edmunds.com/advice/finance/articles/105266/article.html

rroyce10

......... Keep the Cash and get the Gap .............................

Big money down only accomplishes one thing --- it lowers the payment .. it doesn't lower the residual, it doesn't lower the pay-off, it doesn't lower the rate and it won't lower your voice ..... if this bad boy gets whacked in 20 months, you get Zip .. if this stud gets stolen in 25 months, you get Zippity Do Dah .. if you decide to trade or sell it in 30 months, you will get a kiss and a handshake, and maybe a "thanks for stopping by" .. that's about it .....



Terry. :shades:

stillageek

I am leasing a Acura TSX through US Bank. I am not sure if I have GAP or not. There is a section on the back that goes as follows: WAIVER OF GAP AMOUNT; TOTAL LOSS OF VEHICLE - If the vehicle is subject to a total loss due to collision, destruction or unkown theft as determined by us, you will pay to us the Gap Amount, which is the difference between the Early Termination Liability set forth and the insurance proceeds received by us on account of the total loss of the vehicle. However if you had in effect the vehicle insurance required under this Lease at the time of the total loss, we will waive the Gap Amount and you will pay to us the sum of:" It goes on to state I owe late payments, the amount of my deductible and any extended warranty money. I must also pay them until my insurance company does. I am a geek....not a lawyer. I take this to mean that since I have the amount of insurance required if the vehicle is totaled or stolen I owe them my $500 deductible and that's about it. I am never late on payments and didn't buy any extended warranties. Am I right? This was my first lease, I rolled $4000 of equity from my last car (2003 Toyota Matrix, I put nothing down yet came out $4K ahead...nice) which I now read was stupid. All my Edmunds reading did allow me to pay invoice plus $600 for my TSX w/navi though. In theory if my car is totaled down the road and the market value exceeds the early termination amount would I get the extra cash? I drive less than 9000 miles a year, which I believe really helped the value of the Toyota.

kyfdx

I think you have read it correctly... You are covered by their "GAP insurance", as long as you are carrying the minimum insurance coverage that they require..

I believe the verbiage also requires you to keep making your lease payment, until the claim is settled.

I think, in theory, you would get any overage, but since you rolled in negative equity, I wouldn't think that it is likely that the market value would exceed payoff.

regards,
kyfdx

stillageek

I think you read it wrong or I typed it wrong. I had $4000 of positive equity in my last car. So I "put down" $4000 worth of capitalized cost reduction, TTL and first months payment.

kyfdx

Okay... gotcha..

Still, unless you total it very early, value exceeding payoff is unlikely.. Technically, I suppose you are entitled to it... but, I wouldn't count on it..

regards,
kyfdx

rroyce10

..... **So I "put down" $4000 worth of capitalized cost reduction, TTL and first months payment. .**

Yikes .........! .. $4,000.? ... leasing is like renting, you don't own it .... the $4 grand only lowered the payment for the length of the lease, no equity, no value .. you might as well just lite the money and cooked some good hot dogs with it .......



Terry

stillageek

Hindsight is always 20/20. I should have taken a check for the $4000 and used pieces of it each month to pay the lease. Too bad one can't refinance a lease. I assume at the end of the lease, assuming the car isnt stolen or totaled, that I will come out the same either way right? A lease if based on the difference between the agreed upon purchase price and the residual, so I either pay them now (and assume to continue my accident and theft free life) or pay them pieces at a time.

kyfdx

Exactly... as long as everything goes according to plan, no harm done..

Nice car... good luck!!

kyfdx

cadillacmike

Just don't let your insurance lapse like the fool in the other thread, who rear ended someone during a LAPSE period.

I don't get some people...

jone345

I got my car more than a year now. I looked at the lease contract and don't find anything regarding GAP insurance. I was wondering if I can still buy the GAP insurance? Where can I buy it? I have Policy with AAA which don't offer gap and I paid the whole year already.
Is it too late for me to get GAP insurance since it 1 yr and 4 months now.

It is Infiniti Financial
G35 coupe 04

Thank you :confuse:

danf1

Infiniti provides GAP insurance in all of their leases. They don't put it on the contract because you are not paying for it.

jone345

So, say if there is accident would I have to pay the different after the Insurance paid off ACV of the car??

Than Danf1

cadillacmike

You would probably only have to pay your deductible - if it was your fault.

tm121

Check the back of your Infiniti lease contract. Mine says if the lease is stolen or destroyed Infiniti will accept whatever my insurance company gives them. I am only responsible for my deductable.

hedden

All this talk of leasing is fine, but what about when purchasing. I just purchased at $26k with $5k down and 36-month financing. How would gap insurance help me?

kyfdx

If you put $5K down, it likely won't help you... The value of your car will probably always exceed your loan value...

danf1

I wouldn't recommend gap insurance for you in that situation. You have a nice down payment and will finance short term. Now if you had no money down and financed for 72 months, you should get it.

hedden

Thanks guys, that's what I thought. My insurance agent was pushing it, but didn't even ask what I put down or what my financing was. I declined.

marsha7

the purpose of gap ins is to protect you against a major differential in the value of the car vs what you will owe on the lease...many leases demand to be paid out in full, even if you wreck the car in the first month...

You put $5K as a "down payment"...but does it not depend on the rate of depreciation of your vehicle???...I think a good example might be what I own, a Crown Vic...I am sure it depreciates like a rock...even with $5K down, I would bet that the car depreciates faster in 3 years than the paydown on the lease...just my thought...

Once again, ins is to protect us from risk of payouts we cannot afford...if we can afford them, then gap ins is a waste of $$$...if we are afraid of getting stuck with a $4,5 or 7K payout, then a $400 gap ins premium makes much sense...as long as you make an INFORMED decision, I wish you well...just don't make a decision based on suppositions, when knowledge is available...

Example: most folks know that "mortgage life insurance" from the Lender is overpriced and puts biig fees in the lender's pocket...better to buy your own general term policy to cover you for death and you can buy much more with the same premium dollar...BUT, if you are 100 pounds overweight, or severe diabetes, individual life policies may not insure you, but most mortgage life policies do not have a physical, and they accept almost anybody...so, if you want your spouse to receive the house debt-free, mortgage life is a great idea if you cannot qualify for any other life ins...

hedden

I think you're replying to me, so I'm responding.

My question was toward my purchase -- not a lease. $5k down and 0% financing for 36 months. So if a differential exists, I'm paying it down $600 every month. I think that differential will be $0 pretty quick.

If you have a high differential, I think gap insurance makes sense regardless of how much you have in the bank -- it's all a question of risk/reward.

My question was mainly to clairfy for myself that gap insurance doesn't help you when you put down a large enough down payment.

marsha7

You are correct...gap ins is, literally, to fill in the gap between what it is worth and what you owe on the loan...

If your down payment, plus your monthly payments, pay down the loan at the same rate that the car depreciates, gap will do you nothing...no gap, no need for gap ins...

Whether lease or purchase, gap is really the same...and, since SO MANY folks have 4,5, or 6 year loans, gap for them is "mandatory" (or should be) because their vehicle are depreciating like rocks (exceptions, as always: Mercedes, Lexus, BMW, Corvette, and all the other cars that maintain their value, but an ordinary Ford, GM, DC will be worth half by the third year) and their loans are barely falling like feathers...

cupie9

I know this has probably been answered, but I'll ask anyway. I lease a 2002 Nissan Altima. Earlier this week, I had an unavoidable collision with a deer while going about 55mph. I am waiting to find out if my car is totalled, but I'm guessing it probably is. I think the repair estimate is about 70% of the perceived value of the car.

Do I definitely have gap insurance from Nissan Motors Acceptance? I've heard differing opinions, but a dealership I stopped by today read my contract and said I do. I'm asking because I'm about $5,000 upside down on the car.

Thanks.

marsha7

It will either be part of your basic contract, if they include it, or a separate contract, as I have on my vehicles...if it is separate, look at your bill of sale, as it will certainly show up as a separate charge, which is a pretty good guarantee that you have it, or at least paid for it... :shades:

msabrobinson

Does anyone know if the state of Texas has regulations on gap insurance when you purchase it from a Dealership? A Dealer told me that he had to sale me the gap policy based on the amount financed. He could not adjust the figures because it is state regulated, is this true?

151ranch

yes, in Texas Gap is an insurance product. Premium charged is based on amount financed, term, and whether the debt is a loan or lease. Rates are generally the same for all insurance companies.

marsha7

with a libertarian streak, I am not fond of govt rules forcing one to buy things...but, forcing a buyer to buy gap ins is a good idea, using govt "for our own good"...I see too many clients whose car is totalled, and they still owe more than the car is worth, so they have to pay $3K-7K to pay off the car out of their wallets, and they often do not have the $$$...

This would be 100% cured if the lenders would not loan over 70% of a car's value, requiring a 30% down payment...then the rapid depreciation would not over take the amount owed on the loan because of the equity position in the car...

But, a 30% down payment would mean that 10 million cars would be sold annually instead of 17 million...so, it is better to protect the consumer from their own stupidity by forcing them to buy gap, just as they force you to buy liability ins...

I am amazed at the number of folks who would drop their ins if the law allowed, using the logic "well, I am a good driver, so I won't cause an accident"...which is why they call them...accidents...

ifyoubuildit

well stated

noshomo

I purchased gap insurance for my new pick-up. it is now paid off and i recently was involved in an accident(no fault), most likely the truck is a total loss. Does that gap insurance cover any loss here. accident happened 9-20-05 truck purchased 9-2003
paid off 5-2005. desperate