As my car depreciates every month, do I need to pay less for gap insurance?

May 17, 2016 Posted by admin

The fact that a new car loses its value by 15-20% as you drive it out of the garage cannot be denied. Over a usage of 1 year a car’s value decreases by about 20% and by 40% over a use of 2 years. Gap insurance provides a compensation amount to cover the car’s repairing charges because vehicle finance management services pay you the depreciated value of the car at the time when you claim the insurance. This can leave you under a pile of debt and also no car.

All cars depreciate; it is that some depreciate more quickly than others. There are only a few cars that do not get a quick decrease in their value and retain their price even after a lot of use and believe me, there are only a few types of cars like this, and they are the expensive one. For getting GAP insurance, never go to a car’s dealer because they generally charge you 3-4 times more than the actual insurance amount.  GAP insurance is not required every time, but you may need it under the following circumstances:

  1. If you have financed in a car for an extensive period of more than 4 years, then GAP insurance is necessary because it has further more benefits and compensates a reasonable amount in case of an accident. Selecting the short-term packages is beneficial than a long-term one, because in a short term package your loan gets off quickly than a long period financing.
  2. If the package you selected had a down payment of less than 20%, then you will have a greater loan amount than your car is worth, and in this condition if your car gets in to an accident, GAP insurance pays for your loan amount.
  3. If you travel a lot and do a total of more than 15,000 miles a year, then you must certainly get GAP insurance because the cars that have done more miles depreciate quickly than the ones that only get an average use.
  4. If you are leasing your car, then you should consider getting a GAP insurance to secure your vehicle’s future.

5.Last case, if your car depreciates a lot then GAP insurance is a must have because you may end up with just a few hundred bucks from your vehicle’s finance management and still owe a lot of money in the case of a total loss, which is the condition we are talking about here.

 The answer to the query “IF MY CAR DEPRECIATES EVERY MONTH, DO I HAVE TO PAY LESS FEES FOR ANNUAL INSURANCE” is “No”, the annual or monthly fees you have to pay to your Guaranteed Asset Protection company is fixed by considering the value of your car when you bought it. The GAP insurance companies have very affordable yearly prices ranging from $300-$500 and various other compensations in case of what we can refer to as a “Total Loss”. These annual fees vary greatly depending upon your car’s value and your finance management. It is also advised to not to go for GAP insurance if your car is worth less than $1000 because you may generally end up paying more money than your car’s actual price.

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