Is GAP Insurance Worth It?

Is GAP insurance worth it? It’s a great question that many people have when purchasing a new car. What is GAP insurance on a car? GAP insurance, also known as GAP coverage or GAP protection, covers the difference between what your car is worth and what you still owe on your auto loan if your car is totaled or stolen. This “gap” is something you’d otherwise have to pay for out of pocket. But is the extra cost of GAP insurance really necessary? What is GAP protection really good for? Our finance department wants our Lakeland customers to make informed decisions, so let’s take a look at the pros and cons.

What is GAP Protection Good For?

Is GAP protection worth it to the average Bartow consumer? What is GAP insurance on a car designed to cover? There are a few scenarios when GAP insurance could really pay off:

• You’re buying a new car and financing a large portion of the purchase price. New cars depreciate quickly so you could end up underwater on the loan.
• You have bad credit and little or no down payment. Higher interest rates mean slower loan repayment.
• You drive high annual miles on the roads of Winter Haven, Auburndale, and beyond. The more miles on a car, the quicker it loses value.
• You opt for a long loan term like 72 or 84 months. In this situation, you’re more likely to owe more than the vehicle is worth.

Is GAP Protection Worth It if Your Loan is Small?

What is GAP insurance on a car good for if you don’t owe much on your loan? Here are some cases when GAP insurance may not be necessary:

• You make a large down payment, typically 20% or more of the purchase price. This reduces the risk of becoming underwater on the loan.
• You have excellent credit and qualify for lower interest rates. You’ll pay off your loan faster.
• You drive fewer than 12,000 miles per year. Your car will depreciate more slowly.
• Your auto loan term is 36 months or less. Your car won’t depreciate as quickly.
• You have enough funds in your rainy day account to cover the gap.

Is GAP Insurance Worth It to You?

At the end of the day, whether GAP insurance is worth it or not depends on your specific situation. If you’re worried about potentially being underwater on your loan if your car gets totaled, then GAP insurance may give you peace of mind. But if you have a large down payment, a shorter loan term, or don’t drive many miles per year, it’s an expense you may be able to do without.

Talk to the Finance Department at Kelley Automotive Group

If you’re in the market for a new or used car, stop by one of the Kelley Automotive Group dealerships like the one in Lakeland to discuss where to buy GAP insurance and whether it makes sense for you. Our finance team will give you honest, no-pressure advice tailored to your unique situation. In the meantime, check out our other car buying tips, like our post on how to tell if  you’re getting a good interest rate on your auto loan. We’re here to help, so come see us today!