Do I Need GAP Insurance?

Get Car Financing
Even with poor credit.

By

Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


, - April 19, 2018

Guaranteed asset protection (GAP) insurance isn’t required, but it can come in handy if a borrower finds themselves with a totaled car.

What Does GAP Insurance Do?

GAP insurance covers the difference between the car’s value at the time it’s totaled or stolen and the balance on the borrower’s loan. GAP insurances acts like “just in case” insurance – a borrower may never need it, but having it can really come in handy.

But because it’s not required, many people choose to not pay extra for GAP coverage. If a car buyer isn't sure about purchasing GAP insurance for their vehicle, consider these five questions:

  1. Was the down payment less than the optimal 20 percent mark?
  2. Is the car new?
  3. Is the loan term five years or longer?
  4. Was any negative equity rolled into the new loan?
  5. Does the vehicle depreciate more quickly compared to other vehicles?

If the answer to any of those questions is “yes,” consider GAP insurance, because it’s likely the loan balance will be significantly higher than the vehicle’s actual cash value, especially early on in the loan. New vehicle loans benefit the most from GAP insurance, but a borrower can still purchase it for a used vehicle.

Where Can I Get GAP Insurance?

Finding GAP insurance providers doesn’t need to be a hassle. A borrower can:

  • Go to their auto insurer
  • Pay a one-time fee through the dealership or lender
  • Pay a one-time fee through a company that provides GAP insurance

As for how much GAP will cost, it depends on several factors, including where the insurance is purchased from and the value of the vehicle. Typically, it’s cheaper to purchase GAP insurance through an auto insurer by adding it to the annual premium. If the borrower goes to a lender or dealer, they could expect to be paying double or triple what an insurance company would charge. Make sure to contact the insurance agent to discuss rates.

Bottom Line

It’s important to make sure you and your car are covered. Anything can happen on the road, and GAP insurance can put your mind at ease if you find yourself with a stolen or totaled car. If you’re in the market for a vehicle but worry your credit will get in the way, let CarsDirect help.

We work with a nationwide network of special finance dealers that have the subprime lenders available to help people who are struggling with credit problems. Fill out our online auto loan request form today to get the process started.

Need a Car Loan?

It only takes a minute.

Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


Search New Cars by Loan Payment »

View estimated loan payments based on local rebates and financing offers.

Loan approval is not guaranteed and is subject to credit application and approval of the lender. Individual loan terms may vary. Use of this website constitutes acceptance of CarsDirect.com's Terms of Use, Disclaimer, Privacy Policy, and Cookie Policy.