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The Truth Behind Car Dealer Gap Insurance

gap insurance, dealer warranty insurance, liability insurance

The Truth Behind Car Dealer Gap Insurance

When you purchase a vehicle from a car dealership, the sales pitch often includes gap insurance. The reason is that your car loses value the moment you drive it off the lot. In fact, the minute you sign the paperwork, your vehicle goes from being a new car to being a used automobile, and its value immediately decreases.

If you were to have a wreck in that brand-new car, your insurance company probably wouldn’t cover the cost of what you owe on it. They would only cover the cost of replacing your vehicle with one of the same value. This is why you should consider buying gap insurance when you purchase a new car. So what is gap insurance? Also known as guaranteed auto protection insurance, it will cover the difference between your car’s depreciated value and what you actually owe on your auto loan if your car is stolen or totaled.  If your car is demolished or stolen, gap insurance covers the difference between what your auto is worth (based on current market value) and the amount you still owe on your loan.

Avoid Shady Gap Insurance Deals at the Car Dealership

Here is the typical scenario. You choose the car you want to purchase, get the finance agreement pitch, and then move to discussing extras like gap insurance. The usual pitch is cloaked in terms of urgency, but the underlying narrative tells a much different story. You see, car dealerships profit like bandits off gap insurance. They retain commissions as high as 50% of the policy premium. That is money you’re putting right into their pocket just for the privilege of letting them sell a gap policy to you.

The reason most customers fall for the sales pitch is simple. They assume that the dealership is the only place to purchase gap insurance. While this is certainly false, the dealership won’t mention it, because they want to make the extra commission. Don’t fall for this. There are other places to purchase gap insurance for much less money.

You could purchase this coverage from other sources, like lenders or credit unions, and pay less. You could expect to find deals ranging from $250 to $700 annually with these options. They are not tied to dealerships, and as a result, have much better pricing

However, the best place to find a great deal on gap insurance is your auto insurance company. Select Insurance Group can find a price that is significantly less because we shop around for the best price, which can sometimes be as little as $20 per year. This is why it is always best to talk to a licensed agent before making any decisions. They have industry insight and experience and can help you make informed decisions.


How to Benefit from Gap Insurance Coverage

So what do the above scenarios tell you? It’s more than worth it to consider purchasing gap insurance from anywhere but a car dealership. There is really no reason to roll the gap policy into your dealership finance agreement, since you typically only need to get protection for a few years.

Gap insurance is a wise choice in any of these circumstances:

  • You are purchasing or leasing a new or slightly used vehicle.
  • You are buying a vehicle of significant value.
  • You are financing a new or used vehicle without a large down payment, creating a “gap” between your vehicle’s actual value and your loan amount.
  • You do not have significant cash savings that would allow you to cover the difference between the amount you owe on your loan and the actual cash value if your car is stolen or totaled.

As with most types of insurance coverage, everything comes down to your risk. If you are buying a car, gap insurance will most likely be optional, and you get to decide. Do you want to avoid the possibility of a large financial burden if something bad happens to your car, or are you willing to take that risk?

Industry statistics show that new vehicles lose about 30% of their value in the first year after purchase, and 20% the second year. As a result, car owners can end up being upside down on their loan: The value of the automobile is less than the loan amount. This makes gap insurance a wise investment if your vehicle is damaged or stolen within that time frame. That’s a benefit you cannot argue with. Yet, to purchase the best policy and get the most benefit, you should always talk to your Trusted Choice agent to help you decide whether gap insurance is worthwhile, based on your circumstances.

How Does Gap Insurance Work?  

Gap insurance covers the gap between what your vehicle is worth and what you are actually on the hook for in regard your vehicle loan after a collision. Does gap insurance cover theft? Absolutely. However, typically there is a waiting period (30 days or so) after the claim is filed. This leaves time for your vehicle to be recovered. If that occurs, then your standard insurance coverage activates. It is important to reiterate that gap policies are typically only needed for a specific period of time. Once the market rate of your vehicle plateaus and comes in line with current market rates, a gap policy is no longer needed. However, since the decrease in vehicle value is so drastic in the beginning, gap insurance is a worthwhile investment.

It works like this. Let’s say you purchase a vehicle brand new for $35,000. The moment you drive it off the lot, the value drops. Then, it may only be worth $27,000. If you are in an accident, your auto insurance will pay the replacement cost of the vehicle, or $27,000. The policy specifies that they must fulfill the obligation of replacement at current market value. It has nothing to do with the loan value of your vehicle. You are still $7,000 short. Gap insurance would make up the difference.

The cost of gap insurance will vary depending on a number of factors, including the value of your car. Did you just buy a new Jaguar or a Mitsubishi? Are you leasing a new hybrid car? At an average rate of just $40 per year, it is most likely worth the extra insurance expense if your car’s loan amount significantly exceeds its value. Another factor that will affect your gap insurance cost is the auto insurance company you choose. Not all insurance is the same, and prices can vary dramatically from one insurance provider to the next. Working with an independent agent who can compare prices and options from multiple companies will help you find the best coverage and price.

Getting the Best Deal on Gap Insurance

It is important to keep in mind that not all auto insurance coverage is equal. Therefore, it is in your best interest to work with an independent agent  like Select Insurance Group to make sure you purchase a policy that best suits your needs. We will get a much better deal than if you purchase a policy from a dealership. Contact a Select Insurance Group licensed agent today at 855-GET-SELECT (855-438-7353) to make sure you purchase the right gap auto coverage policy.

Getting The Cheapest California SR22 Insurance

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Getting The Cheapest California

Getting The Cheapest California – There are several ways to obtain cheap in California but sadly, most people do not know about this. Most people think that their present is already the best deal. Their insurer is not the only provider of so when they get to say they already have the best deal, they might be totally wrong.

Most people always fail to shop for quotes

Most people think that it would only take so much of their time when they shop around. But in our digital world, shopping for would only take a matter of minutes. You will just only be required to answer a questionnaire and submit it online. In an instant you will already be given several quotes from different insurers based on the information that you have submitted. Shopping for quotes online could really save so much of your time and effort.

Do not fail to compare your quotes for once you have gathered them.

You actually have a couple of options to find inexpensive rates. You may visit each website of an insurance company or go directly to and compare your quotes in this have-it-all site, an comparison website. Compare carefully all the quotes that you have gathered including your present coverage and see which insurance offers, if not the best, better deal than your present coverage.

After shopping and comparing online, buy directly your preferred quote online. Buying an policy online allows you to get discounts from insurers. Hence, buying online is a great way to save not only your time but also your money as well.

 
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