A GAP In Your Auto Insurance Coverage Could Be Costly

More and much more car manufacturers and dealers are allowing customers to purchase automobiles with little or no funds down. Although this is a excellent boon to any person who just does not have the funds to put 20 percent or far more down on a shiny new auto, the downside is that it puts the buyer in a potentially harmful monetary situation if an accident or theft should happen.

The GAP (Guaranteed Asset Protection) is the difference between the actual cash value of your car and what you still owe on your loan. If your auto is stolen or declared totaled, your auto insurance organization will pay you the actual cash value of the auto. With out Gap Insurance your lender will hold you responsible for paying the difference. This indicates you will have to come up with hundreds, or even thousands of dollars to pay that debt.

If you can not afford a 20 percent down payment on a automobile, then chances are you are even less likely to have the monetary reserves to cover the inevitable monetary GAP between the insured value and outstanding balance of your auto loan in the event of a total loss.

There is an interesting mathematical relationship between the length of a automobile loan and the gap between fair marketplace value and actual original cost. The gap between these two amounts is at its absolute greatest the really moment one drives a new car off of the dealership lot.

In the course of this brief time span, before a substantial number of payments have been created, the difference between the actual price of the vehicle and fair marketplace value can quickly exceed 15-20% or a lot more leaving you in the lurch for thousands of dollars of uninsured liability.