Have you ever wondered what would happen if you got into an accident a week after you bought a new car? Two? Most of us cling to a youthful naïveté that tells us there's no possible way we could get into an accident less than a year after buying a car-at least, not one that would total it.
Unfortunately, Lady Luck doesn't work that way-and way too many people choose not to get GAP insurance for their car and wind up paying out of pocket for a loan on a car they don't even own.
Have you ever known a creditor to just smile, pat you on the head and tell you everything's forgiven after you've lost/damaged the property they loaned you money to buy? And if you do, do you have their phone number handy? Creditors don't particularly care about why you borrowed the money, or what happens to what you bought after the fact.
The only thing they care about is that you took out a loan, and now you have an obligation to pay it back.
That means that even if you've totaled your car for one reason or another you're still responsible for paying back the amount of your loan in full-a reasonable request, until you consider the fact that if you haven't been paying on it very long that loan might well be worth more than the value of your car! That's why you need GAP insurance.
Did you know that your car starts to depreciate the minute it drives off the dealer's lot? No, probably not.
Most people don't.
That's not a popular concept, so it tends to be one that dealers play down when you're signing the contracts.
But what you don't know could cost you thousands! In extreme cases the value of a new car can drop as much as 30% within weeks of leaving the dealer's, when it's a working vehicle rather than a car lot decoration.
Since your insurance company is only going to pay the current Blue Book value of the car when they cut you a check to "total" the vehicle you're still going to be left paying that 30% out of pocket.
GAP insurance will pick up the tab for that 30% and allow you to walk away from the transaction free and clear.
(That's why many lenders make purchasing GAP insurance a mandatory part of your borrower's contract.
) Think about it.
If you're caught without GAP insurance after an accident you're going to be left with a loan payment that puts a drain on your resources, and you probably won't be able to get another one until that one is paid off.
That means no car, and no money to buy another one.
It's a bad situation all the way around.
Purchasing GAP insurance might not help you buy another car, but it will leave the door open to allowing you to take out another loan when the dust clears.
With GAP insurance you can walk away with your bank account and your pride firmly in place.