If you’re buying or leasing a new car, you may come across something called “GAP insurance.” So what is GAP insurance? What is GAP protection good for? How does GAP insurance work? Is GAP insurance worth it? GAP insurance helps protect you if your car is totaled or stolen. So things like:
- Theft
- Fire
- Vandalism
- Accidents
- Nature damages (tornado, hurricane, flood, etc.)
Our finance department wants you to make an informed decision, so let’s take a closer look at what GAP insurance covers and whether it’s worth getting for most Warwick drivers.
What is Gap Protection?
So, what is GAP insurance, and what is GAP protection used for? GAP insurance is a type of add-on coverage you can get from your auto insurance company or dealership when buying or leasing a new car. GAP insurance, which stands for “guaranteed auto protection” or “guaranteed asset protection,” covers the difference between what your car insurance pays out for a totaled or stolen vehicle and what you still owe on your car loan or lease.
How Does GAP Insurance Work?
So, how does GAP insurance work? Say you financed a new car for $20,000. A couple years later, your car is totaled in an accident on our Providence, RI roads. Your insurance company determines the car is only worth $15,000 at the time of the accident. But you still owe $18,000 on your loan.
What is GAP insurance, and what role does it play in this case? GAP insurance would cover the $3,000 difference so you don’t end up owing money on a car you no longer have. Here are some key points about how GAP insurance works:
- Covers the “gap” between the car’s value and remaining loan balance
- Typically costs $300-$600 one-time fee or monthly payments
- Only applies if car is totaled or stolen, not other losses
- Won’t cover more than your loan balance
- Refund may apply if you pay off loan early
Is GAP Insurance Worth It?
Is GAP insurance worth it? Whether GAP insurance makes sense depends on your specific situation. GAP insurance provides valuable protection for many Newport, RI car buyers and lessees. Consider your loan terms, down payment and risk tolerance to decide if it’s a smart choice for you:
- Worth considering if you make a low down payment: With little money down, you’re more likely to end up “upside down” owing more than the car is worth. GAP provides protection in this scenario.
- Less beneficial with a large down payment: If you put down 20% or more, you’re less likely to need GAP insurance.
- Important if you leased: With a lease, you must pay any positive “gap” between the car’s value and remaining payments. GAP insurance covers this.
- May come free with lease: Many leasing companies include GAP insurance for free.
Talk to the Finance Department at MINI of Warwick About Your Options
Stop by MINI of Warwick to learn more about GAP insurance and other coverage options for your new MINI. Their finance experts are happy to answer your questions and make sure you get the right protection. Don’t leave the dealership until you fully understand GAP and how it works for your unique situation. But be sure to check out our new vehicle specials, as well as our other automotive research. We’re located conveniently near Cranston, RI. So come in for a test drive or contact us today!
