First let me give an explanation of how works. Gap Insurance basically works how it sounds, it covers any gaps left over by your regular car insurance.
Lets say you buy a 40,000 SUV that depreciates $15000 when you drive it off the car lot. This actually happens, but dont forget about the vehicle you traded in that you were upside down on and carried money over to your new purchase. Now, you carry over $5000 and you now owe $45000 plus taxes, interest, etc. Your vehicle is worth $25000-$30000.
Now, lets take this example and assume your vehicle is stolen or you are in an accident and your SUV is totaled. You owe close to $50000 after taxes and fees and some interest charges. Your insurance wants to settle with you and pay what the vehicle is actually worth. They say they are going to pay more than it is worth and settle with you for $38000-$40000. But wait, You owe more than that amount on your vehicle.
This is why dealerships have made untold fortunes selling Gap Insurance Policies at the time of purchase. Many customers buy their car and tell the salesman they must have Gap Insurance added. Many will not buy a car without Gap Insurance. If you have ever had a total loss with your vehicle and had to use insurance, you would have piece of mind with Gap Insurance. You would actually be able to go and buy another car immediately because you know you will have at least a zero balance on your loan.
Now, lets talk about the cost of Gap Insurance. The dealership I work at charges $799 and many other dealerships charge more than this amount. You must buy Gap Insurance at time of purchase.
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