It’s not a nice thought, but cars do get stolen and accidents do happen. Guaranteed Asset Protection or GAP insurance protects you in these events. In short, GAP insurance covers the difference between an insurance pay out and what you still owe on the vehicle.
Say, for example, you owe $12,000 on your car and it is stolen or written-off and the insurance company will only pay-out $9,000 (the current market valuation at the time), GAP insurance would cover the remaining $3,000. For FastCar Loans customers, we provide GAP insurance up to $10,000.
Is GAP insurance for you?
One thing about vehicles – new and used – that can be guaranteed is they depreciate as soon as you drive off the lot: sometimes quite significantly and quickly.
If you have purchased your car with little or no equity (deposit), the key thing to know is that insurers will only pay out the current market value of the car. If after a year the current market value has dropped by $5000 for example, but you have only paid off $2,000, you would be responsible for the shortfall to your lender.
If you answer yes to one or more of the following, consider GAP insurance as protection:
- You have put down less than 20% deposit
- You have a 60 month finance term
- You have included negative equity from a previous vehicle loan into your new loan
- You drive more than 25,000kms a year
- You have chosen a vehicle with a track record of high depreciation rates
