Is Auto Dealer Gap Coverage a Good Idea?

Auto dealer gap coverage is a good idea when you are purchasing a new or used vehicle and are making a small down payment, or financing negative equity. After you find a vehicle and negotiate a great deal by using tools like those at CarsDirect you will have financing options to consider. The dealership's finance and insurance (or F&I) manager will help you select the best financing options. The F&I manager will also offer you a variety of protection packages and insurance policies, including gap insurance.

Dealership gap insurance coverage is a good idea because electing the coverage at the dealership means that you can finance the cost of the policy by rolling it into the total balance due on your new vehicle. Alternatively, you may also choose to pay cash for the coverage. In any case, choosing the dealership gap coverage will ensure that the policy is applicable to the vehicle you are purchasing. Also, dealership gap insurance will provide you with a contact, the finance and insurance manager, who can answer any questions you may have. Auto dealer gap plans vary in cost, but they normally range from $500 to $700 per policy. However, you may be able to negotiate with the dealership to get a lower price, as they are likely purchasing the gap policy for several hundred dollars less than they are offering to you.

The gap coverage offered at a dealership may be offered through a manufacturer's captive lender (such as GMAC or Ford Motor Credit) or through a third-party insurance provider, like Jim Moran and Associates, who specialize in low-cost insurance policies for automobile purchasers. In either case, electing gap insurance is a good choice that can save you thousands of dollars if your vehicle is totaled.