GAP Insurance for used cars
If you’re unfamiliar with GAP insurance, now is the time to learn if you’re financing a new or used car. GAP insurance covers the void between the outstanding loan balance on the car and the amount insurance will pay to replace it.
The reason this coverage is so important now is the inflated prices of new and used cars. Should the price of cars settle back down within a year or two, then the high price you finance today may leave you with a high outstanding loan balance reflecting the high price paid. Should your car be totaled down the road, the insurance payout may be considerably less than the loan amount, since the replacement cost may be less. In this situation GAP insurance would cover the gap between the loan amount and the insurance payout.
I would recommend you price out GAP insurance before you sign your final purchase…