Gap Insurance

wlbrown9

Hum...I don't see how they could claim $13,000 negative equity. The deal is written up with $13,000 trade (which includes the discount) and either $9,000 or $12,000 balance. In either case it could be claimed there was no negative equity to roll into the deal. In reality one deal has $1000 positive equity the other has $2000 negative equity. So, until the company put is writing how they determine what if any equity and balance you are deemed to have rolled from a previous vehicle, we really don't know what they will cover. The way I have seen sales contracts written in TN was based on apparently accepted practice that deals with paying sales tax on the difference between trade and new purchase, not the amount financed. Now if you are writing up a deal to structure around GAP coverage, you might represent it differently.

Wonder if anyone has real experience to relate on this issue? Would be a real scream to assume that GAP covered the difference then have them pull out all kinds of exclusions that show they would never pay anything (If you were to assume $13,000 negative equity in the example, then you would probably never have a GAP in coverage even though you might have to pull $13K out of pocket to settle when the GAP did not pay.)

marsha7

they write up the contract, there will still be a "base value" for your newer purchase...regardless of the contract, a new 2006 Impala does not have a value of, say, $40,000...so, if the Impala is $30K, and you have $10K neg equity, I don;t care what the numbers show on the contract, the Impala still has a set value...

Having said that, if the GAP says that it will only cover up to 125% of the retail value of the new purchase, then 125% of $30K is $37,500, and if you owe $40K they simply will not pay it...remember, this example is accurate assuming that there is some limitation in the policy...

I would truly hesitate to assume that GAP, while certainly valuable, and necessary (IMO), may not cure the excessive problems of very high neg equity...

wlbrown9

Agreed. The problem in that case would be some finance company loaning $40K on a vehicle with a $30K MSRP or really even $37.5K. That's just like lending someone a shovel to dig their own hole.

sheilap

I bought a new car in 12/20004 from Ford with GAP insurance. Two weeks later, I had the car refinanced. I called the credit union I refinanced with and asked about the GAP I had with Ford. They said I still had it with Ford, not them (but that I definitely still had it). Now the car is totalled, and I may need GAP (not sure yet). I'm worried what if I was given bad info from the credit union. I have the person's full name, title, date I spoke with her, etc., but what if she was wrong?

kizz

I purchased a 2003 jag from a lot. I paid 16-9 for it with 3 grand down, although credit wasn't to hot Im paying 6 grand in finance charges so my total comes to 23 grand. The dealer didn't offer gap and im financed through jp morgan.Any ideas on how i can obtain gap, and would it be the right decision on my purchase?

marsha7

surprised...has a Jag really depreciated that much in only a few years, or was it the little X-type???

qbrozen

was it the little X-type???

Definitely has to be.

qbrozen

call your insurance company and ask them about gap.

kizz

Im with allstate,and they do not offer it. Any ideas?

kizz

Bought at auction. And yep it's the x-type but it's really pretty cool

qbrozen

try getting it independently from a 3rd party, I guess.

I'm not sure how to find a reputable one, but I did a quick search and here's the first one that popped up.
http://www.gap-insurance.com/GAPFAQ.htm

so i'm sure there are more out there. maybe even one that has a real office close to where you live.

wlbrown9

Yes Allstate does offer that coverage. It is under their new "Your Choice Auto Insurance" the "New Car Replacement" package. They also have Accident Forgivness and Deductible Rewards. I have not looked into these packages in detail, but it looks to me like I would pay them more for insurance that I have not had to use for the last 20 years I have been with them. If you have a lot of accidents it might pay off (if you are way upside down on your vehicle, GAP or NCR might pay off if it gets totaled.)

voicemailking

If you have a lot of accidents...Allstate will drop you!!!!
Accident forgiveness and all that goes with it is NOT in every state, it is only in a handful of states as Allstate cannot get past legislature with it because it is another way of getting rate hikes

qbrozen

just about anybody will drop you if you have "a lot" of accidents. What company in their right mind wouldn't?

wlbrown9

I also think that these new 'options' for Allstate insurance come with a price. If you pay us more, we won't drop you for one accident. If you pay us more we will replace your 2 year old with a new vehicle if totaled, etc. It is a way to increase their revenues if you buy expanded and more expensive coverage. I'm having a difficult time thinking about agreeing to spend more on insurance, especially when I think about what I'm spending already :-) Just because their new marketing campaign pushes a product does not always mean it is good for the purchaser, most often it is good for the seller first. Just my opinion.

marsha7

"If you pay us more we will replace your 2 year old with a new vehicle if totaled" then some might feel that it is worth paying a little more for that option, since almost 50% of most American cars' depreciation occurs in the first two years (a $52K new Caddy can be bought for about 25K after two years)...so, if your 2004 Caddy is totaled in 2006, but you owe $45K on a car worth $26K, and if they will buy you a new Caddy, effectively almost paying what you owe (do I understand this correctly???) than it may be worth considering...

Naturally, I would compare it to the cost of Gap insurance...if they charge an additional $500-1000 per year, that could mount up over time, yet the avg GAP policy which which pay off the diff between what you owe and what it is worth may only cost $400-500 ONCE, plus a few buck's interest if you roll it into the loan...

In fact, if I read this right, Allstate could charge you hundreds of dollars yearly, and then invest the money themselves into a GAP policy for you, and they make a killing while some other company is insuring your GAP... wouldn't that be something!!!...it is the same with Whole Life Insurance, they basically buy you a term policy for your death benefit, allow about 10% of the premium to accumulate cash value, and then the rest of the premium you pay in the first 2-3 years goes into the salesperson pocket as exorbitant commission...as the saying goes for life insurance, "If I sell term I can't eat, but if I sell whole life (variable life, universal life, cash value life) I can't sleep"...

Whole life ins has been the biggest ripoff in the last 100 years, unless you are the agent...if I understand the Allstate policy right, they are just adapting a whole life principle to car insurance, and making a killing by just farming out the GAP to another company, probably getting massive volume discounts that you and I could never get, and then pocketing billions in overcharges...

All this is void if Allstate only adds $50-125 per year, which would be the approx cost of buying your own GAP, but if the premium increase exceeds $200 per year, look out...

audia8q

If you have a lot of accidents...Allstate will drop you!!!!

speaking of dropping the customer....some insurance co. are offering free roadside assistance but if you use it more than one time they drop you.

wlbrown9

Well, this would be more like GAP plus, since it would buy you a new car not just pay the difference. BUT, how often do you total a car? Plus, I just realized that if you are looking at $30,000 new replacement cost vs $19,000 value of a 2 year old car, then they might spend a lot more to fix a bad wreck instead of totaling it out? Who would want a car that had been fixed with say $22,000 damage?

Has anybody out there used a policy like this? Wonder what the real details would be in a worse case like this one?

Regular Gap coverage should be less expensive since it would usually only cover the difference in your value vs. what you owe. New car replacement would be at risk for much more outlay.

kanya

:confuse: I purchased a car and had to roll over negative equity into the new car. I purchased GAP insurance from the dealership. With an understanding that the negative equity that got rolled over would also be covered. I received payment for the blue book price of the vehicale from my regular car insurance company. I than submitted a claim to the GAP insurance for the remaining balance of the loan. The GAP insurance denied the claim. The said according to the way the GAP addendum was filled out they are not responsible to pay the remaining balance. I than called the dealership who in turn blamed it on the bank for the way they re financed the loan! I am now pay $11,000 for a car I dont have!! SOMEONE PLEASE HELP!!! I was afraid to buy the car for this egzact reason but the dealership swore up and down that I would be safe with the GAP insurance because if anything happened they would take care of the loan balance!! I am at a lose and have no idea what to do!!

jagar100

This is misrepresentation. Think about it. If buy a brand new car, say $25,000 loan and decide to trade it in next year for a newer car, let's say you had to roll over $5000 so now you owe $30,000. Now let's assume the next year you traded again, car worth $35,000, rolling over $10,000 ($5000 from each car). So now you have financed $45,000. Do you really think that if you total that car the next day, they're going to pay $45,000???? READ THE FINE PRINT. Car dealers do not understand how GAP works. Call an attorney and see if they've had this come up. You would probaby be surprised.

jagar100

I forgot to mention that the insurance company would pay the ACV, so GAP would pay the difference on the new car, not the $10,000 owed on the other 2, not finance charges, overdue principals.
If you add GAP coverage to your car insurance policy, that's the way it is too. Except it's WAAAAAY cheaper than the dealership.
Read your GAP policy and let me know if you find out anything different. A friend of mine has been trading cars for years, always being upside down, and he says he's protected by GAP. I tell him otherwise and he doesn't believe me.

marsha7

read the policy...this was discussed not too long ago, in this very topic, so go back 50-100 posts and you will probably find the string...

It was my supposition that GAP may cover negative equity, but only up to a certain amount...the example just given, owing $45K on a $25K car, is a good example, IMO...I would not expect GAP to pay out $45K on a car worth $25K, but they might pay up to, say, $30-33K...they would probably have a clause to pay out no more than, say 125% of the car's value, so a $25K car would have a max payout of $31,250.00.

Read the contract...

plchan

I purchased a GAP insurance from my dealer which I did not know much about GAP insurance at all. What I have been readying is seem I can purchase GAP from my insurance company. The cost of the GAP from dealership seems high (500-700??) for my Honda Pilot 07.

Does anyone know I can cancel the GAP insurance thru my dealer?

Is GAP insurance provided by my dealer, or by American Honda?

marsha7

purchased from your own ins if they offer it...my two GAP policies each cost about $400 IIRC, which I considered reasonable...the other advantage is that you can roll it into the car loan if you wish...since my 04 Crown Vic was zero interest, it seemed like a good idea at the time...

Kirstie_H

A consumer reporter with a local television station in San Francisco (SF and surrounding residents only) is looking to interview consumers who are shopping for a new car and might consider purchasing “gap” insurance. If you are interested in speaking to the reporter, please reply to ctalati@edmunds.com no later than Monday, April 30, 2007 with your daytime contact info.

sreedevi4

I bought an Accord EX 4cylinder for 21,500 out of the door in MD yesterday. I am debating whether to get gap insurance.. I have financed the car with Honda on a 4 year, 4.9%.

Assuming the car depreciates to 15,000 in 1 year (which, hopefully, is an overestimate), I will break even in 1 year (i.e., the money I owe to the finance company will be less than or equal to the depreciated value of the car) .

So, any suggestions on whether to take gap insurance or not?

TIA

marsha7

is useful if the car is depreciating faster than the loan is amortizing (being paid off)...if so, then you could owe $15K on a car worth $10K, and, for most folks, coming up with the $5K would be difficult if the car was totalled, so Gap makes sense...

If your car's worth is about the same as your loan payoff, Gap would be a waste of $$$, since it only pays the GAP between what the ins will pay for the totallled car and what you owe...if what you owe is what it is worth, gap would be a complete waste of money...
Gap was originally designed for leases, where the full lease must usually be paid out whether the car is totalled...since there could be many lease payments remaining if the car is totalled in the 9th month, Gap would pay the difference and the owner would walk free...

Gap has been expanded for purchases, often saving the skin of many folks who are severely upside down, buying a car for no money down, but a model (Chevy, Ford) that depreciates like a rock...considering how many folks roll negative equity of their trade-in into their new car loan, and then make NO down payment, GAP can be a godsend if the car is burned up, totalled or stolen...

dtownfb

NO need for gap insurance in your case. If you feel you must have it (waste of money), check with your insurance company. It will be cheap and you can cancel it anytime. If you go through the dealer, it will be a lump sum; rolled into the financing and much more expensive. But again, in your case, it is a waste of money.

sreedevi4

thanks for replying. i also think that it will be a waste of money. i have decided not to take it. hopefully, i won't total my accord within a year, and hopefully, the accord won't drop as much in value within that 1 year.

i asked geico (my insurance company) if they give gap, and they said no. so my only option was the dealer or not to take it at all!

marsha7

is only for avoiding the financial strain of paying the difference between what you owe and what the car is worth...that presumes that there IS a financial strain...

If the car is worth $14,500 and you owe $15,000, there would not be any strain for the $500 for most people...put another way, the $500 difference would be the premium for the GAP, so you are simply insuring yourself...not a good move, financially...

But if the car is worth $14,500, and you owe $23,500, coming up with nine grand may be difficult for most folks, esp when they are paying off a car they no longer own...paying a $500 premium for GAP, IMO, is one very smart move...

Considering that many folks buy with no down payment, drive off almost $4-5,000 upside down on the day of purchase (esp if buying a domestic vehicle), GAP insurance, to me, is almost as important as medpay on your auto insurance...

If you read other topics here on insurance, you will be amazed at the number of people who complain how they are being "ripped off" when their totalled car is paid at $10K, but they owe $14K, and they ask, "Where do I get the $$$ to pay off the loan, and why doesn't the liability insurance pay off my loan???"...and the only answer is, "The loan payoff must come from YOUR pocket, unless you have GAP insurance"...

Then they come to this topic and start all over again...

We are here to help, even tho the advice given is the equivalent of closing the barn door after the horse escaped, but at least they will NOT make that mistake on their next car or their next accident...presuming, of course, that they follow my recommendations...

joel0622

The way I know GAP works is the premiums keep going up. Meaning that they are paying claims. I have personally seen it save more then one family from financial disaster.

When we first started selling it years ago the cost was $105 and we sold it for $395. We carried it as a Waiver Addendum which meant I could sell it to you for what ever I wanted. If I wanted to sell it for cost I could, if I wanted to sell it for $500 I could. Now we sell it as an insurance product, which means the premiums are set. Ours is $595 regardless of the term and has a cost of up to $318 depending on the term.

dtownfb

I don't think you have anything to worry about. The Accord hold their value very well. A regular poster, steine13, did an analyst on the resale value of Honda. Based on auction sales and selling price, Honda has the best re-sale value in the market.

Enjoy your car!

louiseb

State Farm(my current car insurance) does not carry gap insurance. Could someone please tell me where I can get gap insurance. I am in Arizona. How much should I expect to pay? I have seen online stores selling for $399 one time fee. Is this a good deal? What should I watch out for?
TIA!

marsha7

companies do sell it, I have purchased all of my GAP policies directly from the dealer...maybe I paid a little more, I am not sure...

My last two policies on two 2004 vehicles, IIRC, were about $400 and $450...

Maybe some folks can find it cheaper on the net, but probably not by much...plus, for me, it was easier to roll it into my monthly payments, about $8 monthly plus a little interest, certainly not a budget buster...

I guess almost all dealers will sell it as a profit item, and, if you are a good negotiator, you might knock $50-100 off the price...

I say try the dealer, knowing these numbers...oh, and these numbers do assume a car between $20-30K, I am not talking about a $100K Porsche or $250K Maybach...:):):)

louiseb

State Farm referred me to an insurance person who found that Mercury Insurance will cover me for about $16 per year for Gap. It's a much better deal than paying $399! or rolling it into the car payment with interest rates.
Thank you for your info Marsha7.

joel0622

This all kind of falls back to the whole after market warranty or manufacturers debate. If you pay a little more from the the dealer then you know they will be there to service the policy. Also you need to find out if you are buying an insurance policy or waiver addendum. An insurance policy is better regulated and securer then a waiver addendum.

joel0622

BTW, for what it is worth I have had dealings with Mercury before and they are terrible. The reason there coverage is so cheap is because they hate to pay claims. Scroll through there BBB results. The magority of there offices have terrible records.

Mercury BBB results

marsha7

While I cannot comment on Mercury Ins directly pertaining to GAP (as an auto insurer, however, they are one of the worst), I will comment from a different angle...

While I would never tell you to spend more money than necessary, something tells me that old adage, "if it sounds to good to be true, it probably is"...$16 per year would be only $64, and considering the payoff on GAP could be in the $1000s, it just seems to good to be true...

But, it IS your $$$, but I think Mercury would be a mistake...

kyfdx

That said.. $399 seems pretty expensive to insure what is likely to only be a few thousand dollar potential loss.

Those are the types of things that I think you should self-insure against. You'll be dollars ahead in the long term.

regards,
kyfdx
(not the host here)

metro123

I remember once a dealer tried to sell me gap insurance when I put 50% down on a car purchase. His justification? "Well....It's only $8 more per month." LOL !!!

By the way, my credit union sells gap insurance for a reasonable amount....something like $250 for a five year loan.

marsha7

I am unaware of the actual numbers, i.e. purchase price, down payment and the "gap" after drive-off depreciation...

If it only a thousand or two, I might agree with you on not buying Gap at all...but if the gap is $3K or more, and probably increasing as the car devalues faster than the loan amortizes, Gap would be a wise investment

metro123...that sounds like a great price, and I would not have thought of asking a credit union...thanks for the thought...while many do not belong, and cannot ask, so many folks do belong to an FCU and should ask when they get a loan...one of the new things I learned today!!!

fantesia28

Hello-

I just purchased a brand new Camry yesterday. So far I love it and it drives great! It was a Japan manufactured model, which I hear typically proves to be better.

Anyways, I have a question about the GAP insurance. I did decline this yesterday when I closed on my loan (financing through Toyota), but I am now 2nd guessing myself on this one. I paid sticker price for the car because I was upside down on my trade in... so, basically they gave me $2,000 extra for my trade-in to cover my loan and I paid sticker price.

The new car is a 07 LE with moonroof, body side molding, rear spoiler, alloy wheels and a couple of other small additions. I paid $23,688 for the car, I think the final financed price ended up being 23,767. I am so paranoid that somoene will crash into me and I will end up losing on this car if it were to be totaled. I am sure the odds of this happening are slim, but now I am 2nd guessing my decision to decline this coverage.

What do you think?

rag5

Fantesia28,

I read your posting I just purchased a 2007 Toyota Camry LE a week ago today I didn't get the gap insurance from the dealer as it was too costly, however I did get it from my auto insurance company so check your insurance company a lot of the time it's way less expensive. My Camry LE was $21,795 but I went thru Costco's auto purchasing program got it for $19,795 plus I was able to get $500 cash back from Toyota so it brought the vehicle down to $19,295 plus I got $4,000 on a trade in so I think I got a pretty good deal.

I'll never go back to an American Car! I checked my mileage I get 28 mpg in the city I have the 4 cyclinder engine with the 5-speed automatic transmission

fantesia28

wow - you got a great deal. I paid the price for having extra options, plus being upside down on my trade in car. I will check with my insurance carrier and see how much it would be for the gap insurance.

I wasn't offered and toyota rebates...

fantesia28

I just hung up with my insurance company. I was able to add the gap insurance on my policy for $2.59/month. This was $6.41 less than the dealers policy!! I think it is well worth the peice of mind should something happen to the car!! So basically, if I keep this on my policy for 3 years it would only cost me 93.24 - wow, totally worth it to me!!

stlpike07

Louiseb,

I am surprised State Farm doesn't provide GAP insurance. Another poster said Geico doesn't either. To me, that is unheard of. How can an insurance company not provide GAP insurance. I'd call again and make sure you are speaking to someone is policyholder services and not a call center representative.

Most insurance companies offer GAP insurance. (I thought all did). I have AAA and they offer gap insurance. For me, having it adds a few dollars a month to my premium, which is already pretty low for someone my age (23).

marsha7

The need for GAP ins is simple math...it is all based on the assumption that your car is totalled for any reason, such as wrecked, burned or stolen, and insurance (yours or the at-fault driver's) has to pay out what the vehicle is worth, and there is the rub...

What the vehicle is WORTH may have no relation to the balance on your loan and how much you OWE...the more upside-down you are, the more you need GAP, simply to make up the dollar GAP between the car's worth and its loan payoff...

You said something significant when you said that you were upside down on your trade-in...so, from the moment you signed the papers, you were already $2,000 in the hole, and that is without one dollar of depreciation of the camry...

Now, look ahead 12, 18, 24 months from today...your loan will hardly be paid down at all (in any loan over 4 years, the first two years are almost all interest) but your car will depreciate a fair amount, so the GAP between your loan payoff and and what ins would pay if your car was totalled would be much larger, may approach anywhere from 3-10 thousand dollars (your Camry will probably depreciate slower than say, a Ford or Chevrolet), and that GAP would have to be paid from your pocket if your car was totalled...

So, GAP pays that difference and you walk away owing nothing...considering that most of us would find it difficult to come up with $3-10K in a day or so, GAP makes sense...

The choice becomes where is the best place to buy inexpensive GAP ins, and that is better answered by other posters here...I paid between $300-400 for my two vehicles, and I bought it from the dealer, as it was a minimal amount added to my loan...others buy it elsewhere, and that is OK, too...

But, unless you put at least 20-30% as a down payment, you probably need GAP, and you will probably regret it if you do not have it and your car is totalled...

I recommend it highly, as high as medpay on your auto insurance, but that is my ranting on another topic...:):):)

alishaelovern

I just purchased at 2007 Toyota Rav4. The very next day I backed it into a pole. I know you are thinking, "What an idiot," but I am used to driving a stick shift and used the break as the clutch and the gas as the brake and backed up hard into a big cement pole. My back window shattered and there is a lot of rear damage, but it is still drivable.

Being that I just bought this car the day before, I am a bit strapped for cash, but I do need to get it fixed because my window is missing. My question is, does gap only cover total losses, or does it also cover the deductible that I would be paying to get my vehicle repaired. I heard that it does cover that. And then it also covers up to $50 a day in rental car expenses also, right?

This is my first new car and the first accident I have had in over 10 years, so I am not really sure how to go about getting everything taken care of.

HELP! Alisha

kyfdx

Generally, GAP doesn't cover any of those things...

You have to report this to your insurance company. You'll have to pay your deductible. Your insurance company will only pay for rental car reimbursment if you paid extra for that coverage.

Unless you have some special sort of GAP coverage? GAP insurance is designed to cover the difference between the insurance value of your car and your loan balance, if your car is totaled in an accident.

regards,
kyfdx
visiting host

marsha7

if your car is totalled for any reason, whether damaged, burned or stolen...

I do not know if fraud is an acceptable reason..:):):)