What Is Gap Insurance?
It’s that time again. You’ve worked hard, climbed the ladder, have a little extra money in your budget, and it’s time to get a new car. However, instead of buying a used car, this time you decide to treat yourself to a brand new car as a way to reward yourself for all your hard work.
So you go online, do some research, and decide which car you like. You drive down to the local dealership, take a test drive, and haggle for a few hours until you decided on a price you like. You smile as you sign on the dotted line, when they hand you your new keys, and you drive off the lot.
As soon as you drive the car off the lot, it loses value. Experts disagree on the exact amount as there are many factors to consider. However, what they do agree on is that brand new cars depreciate in value about 20-30% in the first year of service.
What happens if you’re involved in a car accident that damages and/or totals your brand new vehicle? You took out a $30,000 loan but the vehicle was worth $20,000. If you have good property damage coverage, you’ll get paid the actual value of the vehicle, not what you owe. So they’ll pay you $20,000 and you’ll still owe $10,000 on the loan.
That $10,000 is the “gap” in gap insurance. Gap insurance is specifically designed to pick up that additional $10,000 in lost value after you buy a brand new vehicle. Gap insurance can really help in the off chance your brand new vehicle is involved in an accident shortly after you’ve purchased it. I’ve seen it happen in my practice as a car accident attorney.
If you have other questions regarding gap insurance or were involved in a car accident of any kind, feel free to contact Waggener Law at 727-685-8000.