gap coverage a rip off or legit? (insurance, vehicle, credit)
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bought a 10 accord ex yesterday for $13,997. was hoping id walk out at $15,000 after taxes and the little wheelage fees and title crap, etc, and would have, except for this thing called gap coverage. they said it would cover me if i get my car stolen or it gets totaled, will cover the gap between the value and the loan so i dont owe if something happens. i say ok, and the total ends up at about 15,800.
financed it over 60 months, will pay it off in about 18, but felt like i got conned at the end with that gap coverage.
Assuming you had to put money down, plus the cost of the GAP insurance.
How much was the loan for? If you are planning on paying it off that quickly, you wouldn't have much of a GAP for the insurance to cover, if anything as your equity would build faster than the GAP! I would cancel the insurance.
GAP coverage is really only useful if you're buying a new car IMO. With new cars, depreciation decreases the value of the car faster than you can pay the loan value down sometimes, so if the car got totaled, it's worth less than what you owe.
With used cars though, if they are 3-4 years old and have already taken that depreciation hit, it's not worth it. If it's totaled, you'll be paid what the car is worth, which should be pretty close to or more than what you owe on it. I bought GAP coverage on one car in my lifetime, and it was worthless to me. Ended up paying off the loan far in advance though, so I actually got a partial refund of my GAP premium, so it wasn't too bad. Cost me about $350 all said and done.
I would also recommend cancelling the GAP as well. You likely paid too much for it as well since it seems like you got it at the dealer.
You should have at least 30, maybe even 60 days to cancel GAP and get your money back.
Like others have said, since you plan on paying it off quickly, and also because it's a 4+ year old car, the GAP coverage will actually likely never come in to effect. The only way that I could see it being in your benefit is if your car gets totaled tomorrow, and you get a check in the full amount that the car is worth, plus another 1,000 dollars towards your purchase of a new car.
Source: Did loans at a credit union and sold GAP coverage.
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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Cancel and get it from your insurance company. It's actually a good coverage to have, but the dealers rip you off on the price. My agent (State Farm) offered it to me for $10 every 6 months.
If you financed for 60 months and plan to pay it off in 18 months. No need for GAP insurance. GAP only make sense if you will be upside down as soon as you take the car off the lot and didn't put a big down payment or plan to pay more than min.
For future reference. When you are done negotiation with the price for a new car at the dealership, it's not over. They will try to get you with the finance person. This is easy where you get anxious and try to get out of there so you have your guard down. They will try to sell you GAP, tires insurance, extended warranty, etc... The price they give you is all negotiable. If you are going to get any additional coverage, research before you say yet to any of those (just like you should have research on the price of the car).
As already stated, GAP insurance coverage has merits, however, I would never buy Vehicle Insurance, or any type of insurance, from a Used Car Salesman.
Do a little research, Gtc . . . consider the value of the vehicle and the outstanding loan to determine your "GAP" and for how long?
Does not sound like you are a good candidate for GAP Insurance and the dealer has "hooked" another . . .
All insurance is a bad bet for you, statistically. That's how insurers make money. The only question is if you can afford to take the loss if it goes against the odds.
Cancel the GAP. This is a used car purchase so you aren't taking the "just driven off the lot" depreciation. If the $14k was a fair market price, that's about what you'd get for a total loss. Plus the title and taxes. So you're only upside down due to the insurance itself. In this case, sounds like you're paying more for the insurance than it would be covering you against.
bought a 10 accord ex yesterday for $13,997. was hoping id walk out at $15,000 after taxes and the little wheelage fees and title crap, etc, and would have, except for this thing called gap coverage. they said it would cover me if i get my car stolen or it gets totaled, will cover the gap between the value and the loan so i dont owe if something happens. i say ok, and the total ends up at about 15,800.
financed it over 60 months, will pay it off in about 18, but felt like i got conned at the end with that gap coverage.
Only idiots (or people who put a sizable amount down) skip GAP. You did the right thing. It's a few bucks a month to make sure that if your vehicle gets totaled and you owe more than its worth, the bank takes the loss instead of you.
GAP cost me about $300 through my credit union, and covers 125% of the vehicle's retail value. Every CU has their own rules. Dealership GAP typically covers what you owe. 2,000%, or 2% over value. Does not matter. It also costs more.
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