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So I'm looking to refinance my auto loan with another banking institution that is offering a lower APR, nearly 1% lower, which will allow me to pay my loan off faster. My current loan offered me GAP coverage and I purchased it. The loan that was offered to me by Chase does not.
My vehicle is a 2012 Civic (16500 miles). I owe $13,500 and the vehicle, right now, is worth $15500. However, this was through Kelly Blue Book and insurance companies use a different algorithm to determine what a car is actually worth.
So, if I go with the new loan and my car is totaled in one or two years, will I be upsidedown on the loan? I'm very very good at paying the loan and will occasionally add an extra payment. Currently, my payments are $250 but pay $300. I also put $5000 down on it back in 2012 when I bought it new.
I hear from both sides of the fence saying GAP is only good for the first 2 years of owning a new vehicle as in this period the depreciation value plummets the most, then I hear that GAP is not necessarily if you put more than %20 down upon purchase. Anyway, I'm looking for anyone who would know how a car depreciates vs. steady payments. Will I be upsidedown in a year, two years, etcetera...
So I'm looking to refinance my auto loan with another banking institution that is offering a lower APR, nearly 1% lower, which will allow me to pay my loan off faster. My current loan offered me GAP coverage and I purchased it. The loan that was offered to me by Chase does not.
My vehicle is a 2012 Civic (16500 miles). I owe $13,500 and the vehicle, right now, is worth $15500. However, this was through Kelly Blue Book and insurance companies use a different algorithm to determine what a car is actually worth.
So, if I go with the new loan and my car is totaled in one or two years, will I be upsidedown on the loan? I'm very very good at paying the loan and will occasionally add an extra payment. Currently, my payments are $250 but pay $300. I also put $5000 down on it back in 2012 when I bought it new.
I hear from both sides of the fence saying GAP is only good for the first 2 years of owning a new vehicle as in this period the depreciation value plummets the most, then I hear that GAP is not necessarily if you put more than %20 down upon purchase. Anyway, I'm looking for anyone who would know how a car depreciates vs. steady payments. Will I be upsidedown in a year, two years, etcetera...
And thanks.
Do not pay for gap. Put money in savings and you are far better off.
First of all, check your original GAP insurance policy. You may be due for pro-rated refund if you close that loan.
As for GAP insurance now. What will it cost you? How much are similiar used car to yours advertised at the Honda dealership now? Take a few thousand off. If it's near or around what you owe, I wouldn't get it. I am surprised you even got GAP insurance originally when you put down $5K. IMHO, they totally "hooked" you during the final stage of your car purchase. Let me guess, they told you it was only a few dollars more a month since you rolled it into the loan?
First of all, check your original GAP insurance policy. You may be due for pro-rated refund if you close that loan.
As for GAP insurance now. What will it cost you? How much are similiar used car to yours advertised at the Honda dealership now? Take a few thousand off. If it's near or around what you owe, I wouldn't get it. I am surprised you even got GAP insurance originally when you put down $5K. IMHO, they totally "hooked" you during the final stage of your car purchase. Let me guess, they told you it was only a few dollars more a month since you rolled it into the loan?
Well I just recently purchased GAP when I first refinanced ( American Honda, due to this being my first car financed, gave me a high APR, around 7%, I now have an APR of 3.3% through the credit Union). When I purchased the vehicle I turned it down. But the credit Union talked me into it a couple of months ago. They made me feel like my car was going to depreciate in value soon, so I purchased it ($300 rolled into the loan). If I leave the credit Union, there is no way of obtaining GAP unless I keep shopping around for a good APR.
Do not pay for gap. Put money in savings and you are far better off.
It's insurance. The statistical average will always be better off self-insuring. That doesn't mean you don't buy insurance.
In this case, however, I don't see much reason to buy gap insurance. Civics hold they're value pretty well, it's already a couple years old, pretty decent down payment.
If you owe $13500 and KBB estimates the value at around $15500, you will not be upside down on your loan, even with the way insurance values it. GAP is only good if you are significantly upside down on a car, likely from 0 down payment and taxes. Most will cover up to 145% of what the car is valued at.
Also, your rate is at 3.3%, and you are looking to make it 2.3%? With your loan and payment, it will save you about $300 worth of interest over the 4 years. Is that really worth it to you(consider the refi fees as well)? Seems like a lot of work, just continue with what you have.
If you owe $13500 and KBB estimates the value at around $15500, you will not be upside down on your loan, even with the way insurance values it. GAP is only good if you are significantly upside down on a car, likely from 0 down payment and taxes. Most will cover up to 145% of what the car is valued at.
that's what I was thinking. he doesn't need GAP insurance, he needs reverse gap insurance!
im not a fan of gap insurance to begin with. im willing to take the risk on that hit if the car is totaled soon after purchase. I think it makes even less sense on a used vehicle since that car has already taken the lost value from no longer being new, so that "gap" should be minimal.
If you owe $13500 and KBB estimates the value at around $15500, you will not be upside down on your loan, even with the way insurance values it. GAP is only good if you are significantly upside down on a car, likely from 0 down payment and taxes. Most will cover up to 145% of what the car is valued at.
Also, your rate is at 3.3%, and you are looking to make it 2.3%? With your loan and payment, it will save you about $300 worth of interest over the 4 years. Is that really worth it to you(consider the refi fees as well)? Seems like a lot of work, just continue with what you have.
Well, the GAP I guess is an issue that I am guessing at that I do not need. As for refinancing, the only fee is a $4 title fee and switching loans saves nearly $1200 over the life of the loan.
Well, the GAP I guess is an issue that I am guessing at that I do not need.
I don't think its a very hard guess. if I understand GAP correctly, it covers you for the difference in what the car is worth and what you owe. so you buy it on a new car because you owe $25,000 on the loan, but you get into an accident a week later and the car is worth $23k. so that $2k is protected. in your situation, you owe 13,500 and the car is worth 15,500. so if you crash your car today, you get more than you owe on it. so you are in good shape, no need for gap.
I don't think its a very hard guess. if I understand GAP correctly, it covers you for the difference in what the car is worth and what you owe. so you buy it on a new car because you owe $25,000 on the loan, but you get into an accident a week later and the car is worth $23k. so that $2k is protected. in your situation, you owe 13,500 and the car is worth 15,500. so if you crash your car today, you get more than you owe on it. so you are in good shape, no need for gap.
Yup, that is how I see it too. I was just worried that my cars value will depreciate faster than I can pay it down. But, I am told Civics hold value fairly well. I hope this is true.
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