Most of us know that the value of a new or used car drops by about 20% as soon as we drive it off the lot. So, if you don't put 20% down on your car loan, you could end up owing a lot more than the car is worth for a long time. If you buy a car for $20,000 that is in the middle price range, your loan could be for $4,000. This is more than what the car is worth. Car prices are going up, and more and more of us are taking out loans for the full amount of the loan.
But most insurance companies use the book value, not the loan value, to figure out how much your car is worth. This may seem unfair, especially if your loan requires you to keep full coverage insurance! But if you wreck your car or it gets stolen in the first year and your insurance only pays out the book value, you could still owe thousands of dollars on a car you can't drive. No matter how much your insurance company pays if they decide to total your car, you will still have to pay the rest of the loan.
You should think about getting car gap insurance to protect yourself in case your insurance company decides to write off your car. This kind of insurance will pay off the rest of the loan on your car. Car dealers, on the other hand, usually charge between $500 and $700 for this kind of insurance. You don't have to buy auto gap insurance from the dealer. The same kind of gap insurance can be bought online or directly for less than $300.
Gap insurance can be bought in the US, the UK, and other places. As cars get more expensive, people finance a bigger portion of them, and often finance the whole thing. As a result, gap insurance is becoming a very popular choice. Auto gap insurance is something you should think about if you want to protect one of your most expensive investments.
