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You paid too much for all those cars. You could've told them to discount all the cars 500 bucks more and/or thrown in the GAP.
You really think there is $500 left in a 11k new car deal especially when it is advertised in the paper for 10,999? Hint.....it is a loss leader, they don't have $500 left in the deal and use it to get floor traffic. I bought 3 of them in one month, needless to say they weren't able to upsell me into anything but the advertised special.
An insurance company's obligation following an accident is to pay the fair market value of a vehicle. It is not to pay whatever is owed on the car.
This rule is followed because people make bad car deals constantly. Paying more for a vehicle than its fair market value might create a perverse incentive. Some people might deliberately destroy a vehicle to collect on the insurance in such a situation. The insurance guards against these risks by only paying fair market value. This is expressed clearly in every insurance policy I've ever seen.
I clearly stated the difference between a first-party claim (your insurer) and third-party claim. If you are claiming against an at-fault third party, you have no policy or contract with them. They are responsible for all your damages. Bad deal or not.
The other party is responsible for your losses. You can file suit to recover. You may not even have insurance. They may not even have insurance (in which case there may be no assets to go after). But they are still liable. The fact they have a contract with an insurer to cover them doesn't subject you to their contract terms.
I have bought 30+ brand new cars, from 11K to 84K purchases and never once bought GAP nor totaled any of the cars while still owing payments. So I have saved $15,000 using your recommended rate ($500 per car) so essentially the savings has exceeded the GAP safeguard in all the cases except one or two (meaning 15K in extra insurance costs, even if some of the cars had 10,000 in GAP losses I would still be ahead).
Then why buy insurance at all? Why bother with Life insurance while you are at it. I don't know about you, but I don't plan on dying anytime soon so why pay for it now? Why have health insurance if you don't plan on getting sick? I don't plan on my house getting destroyed by a storm or something, so why have home owners insurance? Insurance is just that, insurance. It is there for "what if" and "accidental" scenarios.
Thanks for beating me to the punch. If you've never needed auto insurance, you're lucky. I finance cars, and I've seen people get their car totalled and still owe thousands. Without GAP, they'd be making payments on a junkyard car. Sure, they can decide to not pay, good luck getting another car loan under 20% (or a mortgage) ever again.
Say you paid $5K down, and the car depreciated $5K in the first year, and then you totalled it. Your collision pays what the car was worth at the time you totalled it, reflecting a $5K diminution in value that you have already realized from the use of the car. Why would you feel entitled to recovery for that?
I financed it 100% - walked out the dealership without paying a penny and taking possession of the car. At 1.94% there did not seem to be a reason to put anything down as long as they approved me for the loan.
I am certainly in a position to fund the shortfall if that should arise without gap coverage but if i can get it cheaply enough, it seems like a reasonable precaution to take. The reality is that although we have not been involved in an accident of any consequence in years, one can be a careful driver but it does not mean that someone else may not hit you. If that happens and even if the other driver's insurance pays for the damage, they will also limit their payment to the fair market value of the vehicle.
Alternatively, the car could be stolen although a Prius - which is what we bought - may not be one of the cars that is prone to being stolen.
Oh, one more thing, even on first-party claims where you have to abide by your contract with insurer, you can challenge their "market value". Blue books and red books are averages, not necessarily applicable to your specific market or vehicle. Challenge their settlement offer and ask them to provide comps.
I have firsthand experience, I bought an Escort wagon in 1998 for $14k total, got rear-ended six weeks later and adjuster totaled it as the initial estimate was over $12k. He wanted to offer $12.5 and I fought it for a few weeks til I got the full $14k.
Everyone talks about a new car dropping thousands in value as soon as it is driven off the lot. Fact is, this is a mythical value as there is no such vehicle available for sale. You can't find anyone willing to sell a new car just driven off the lot for thousands less. There are no comps. A blue book average for a 12,000 mile 1 yr old car is not a valid comp. The closest comp in age, condition, and mileage is the brand new vehicle.
Oh, one more thing, even on first-party claims where you have to abide by your contract with insurer, you can challenge their "market value". Blue books and red books are averages, not necessarily applicable to your specific market or vehicle. Challenge their settlement offer and ask them to provide comps.
I have firsthand experience, I bought an Escort wagon in 1998 for $14k total, got rear-ended six weeks later and adjuster totaled it as the initial estimate was over $12k. He wanted to offer $12.5 and I fought it for a few weeks til I got the full $14k.
Everyone talks about a new car dropping thousands in value as soon as it is driven off the lot. Fact is, this is a mythical value as there is no such vehicle available for sale. You can't find anyone willing to sell a new car just driven off the lot for thousands less. There are no comps. A blue book average for a 12,000 mile 1 yr old car is not a valid comp. The closest comp in age, condition, and mileage is the brand new vehicle.
OP here:
Interesting that you mention this because I went at it a whole different way in an attempt to assess my downside.
We bought a new 2014 Prius 3 which comes with navigation and blue tooth as standard. I went to KBB to find out the value of a used Prius with say 5K miles. KBB does not even have a value for a used 2014 Prius so I then proceeded to ascertain the value of a 2013 Prius 3 with 5K miles to see how much a car like that would cost if one bought it from a dealer. I had to add navigation and blue tooth as options because I guess in that year model those items did not come standard.
Now here is the rub: based on those specs and mileage for that year, the value shown if one buys the car from a dealer is between 23700 and $25K - the latter number is for a certified used car! If I received that sort of payment from insurance in the event of a total loss, I'd take barely any hit on the car based on what I paid for the car. In fact, the loan outstanding is less than the amounts shown above before making any payments.
Admittedly, the actual mileage may be different from the 5K I assumed depending on when such an event (a total loss) occurred but given the values shown above are for a 2013 as opposed to a 2014, it seems that one would not see too much depletion in value from what I paid for it.
In fact, by May 2015, if the 2013 values for the car can be extrapolated to the 2014 vehicle of about the same age, I would by then owe only 19800 on the vehicle. It would seem that any insurance settlement on a total loss would at least be equal to that amount.
Can someone critique what i have written above? If I am right - or within the ballpark - then gap insurance may not be as important as I thought.
I financed it 100% - walked out the dealership without paying a penny and taking possession of the car. At 1.94% there did not seem to be a reason to put anything down as long as they approved me for the loan.
I am certainly in a position to fund the shortfall if that should arise without gap coverage but if i can get it cheaply enough, it seems like a reasonable precaution to take. The reality is that although we have not been involved in an accident of any consequence in years, one can be a careful driver but it does not mean that someone else may not hit you. If that happens and even if the other driver's insurance pays for the damage, they will also limit their payment to the fair market value of the vehicle.
Alternatively, the car could be stolen although a Prius - which is what we bought - may not be one of the cars that is prone to being stolen.
You did the right thing. With that rate, I wouldn't put one shiny penny as down payment.
I think I am still missing something. It sounds like the OP wants to get full use of the car from purchase date to crash date, and then have an "insurance" coverage that will reimburse him for for what he paid for that use, as well as future unfulfilled use. Am I wrong in saying there is no natural entitlement to be indemnified for what he paid for a benefit he already consumed?
It's like trip cancellation insurance that reimburses in full for a round trip ticket after the outward portion has been flown.
Last edited by jtur88; 05-15-2014 at 01:53 PM..
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