What is Gap Protection?
What Guaranteed Asset Protection (GAP) Pays
In the unfortunate event your vehicle is declared a total
loss due to an unrecoverable theft or accidental damage, your auto insurance
company will typically pay the current market value of your vehicle less your
deductible. But what if your loan balance is higher than the market
value of your vehicle? Answer: You would be responsible for paying off the difference,
including your deductible. This can be expensive.
*Cost above are for illustrative purposes only. Actual costs may vary as to make, model and year.
The reason for the potential difference is that normally the
loan/lease balance decreases at a predictable amount as monthly payments are
made. However, the market value of your vehicle is influenced by several
variable factors (e.g. supply, demand, mileage). This means that market value
often may be lower than your outstanding balance - particularly early in your
contract when you have the most to lose.
GAP can help waive the difference, including up to $1,000 of your insurance deductible.2
The Choice is Yours
GAP is an optional form of protection available only at the time you sign your Retail Finance or Lease Contract with the dealership. If you would like to know more about GAP, ask to see the GAP agreement. Besides the limitations listed at the right, terms and conditions may vary by state.
Is the amount you receive from your insurance company enough to pay off your loan or lease balance if your vehicle is declared a total loss?
|Market Value of Vehicle||$13,000|
|Less Your Insurance Deductible||-$1,000|
|Proceeds from Insurance Company||$12,000|
|Amount You Owe on Loan or Lease||$18,500|
|Proceeds from Insurance Company||-$12,000|
In this example, the answer is No! The difference illustrates what you would still owe your lender without GAP.