Gap insurance protects drivers from significant loss in case of an accident or collision when they owe more on a vehicle than it is actually worth.
A simple explanation of Gap insurance, also referred to as Gap protection, is that it covers the difference between what you owe on a car and what the car is worth. There are number of different circumstances that result in this, accidents being the most common, but by having Gap insurance you can prevent a lot of frustration, hassle, and expense. If you are the kind of person that enjoys peace of mind on the road, Gap insurance can provide you the financial relief of knowing that in the event an accident, you will have coverage.
Four Reasons to Purchase Gap Insurance
If you are financing a loan in order to purchase your vehicle, Gap insurance is important to consider. It isn’t uncommon for customers to finance a loan that at some point during ownership of the vehicle, surpasses the value of the car. This is called “negative equity”. This situation can occur in a number of different ways, including:
- Car value depreciation – It’s a well-known fact that cars lose their value over time, some faster than others. When financing a loan, it’s important to consider what the value of your car may be a few years after purchasing. Research previous models of the car and see how quickly they’ve depreciated.
- Financing more than the value of the car – Rolling negative equity from a former car into the loan for the purchase of your next vehicle might seem financially advantageous at the time, but in the event of an accident that totals the new vehicle, your losses will be substantial. This is where Gap insurance becomes particularly beneficial.
- Low or no down payment – Paying less for a down payment is helpful at the time, but, in reality, it just means you will be paying more over time. As a result, you will need to finance a heftier loan. If the amount you finance is higher than the value of the car at any time during the loan period, you’re at risk of loss without Gap insurance.
- Extended loans – With loan term options continually extending, the risk of owing more on your loan than a car is worth becomes more probable. When you finance a 48-month, 60-month, or 72-month loan, you are practically guaranteeing that interest on the loan will surpass the value of the car; another instance where Gap insurance is very beneficial.
At Santa Barbara Auto Group, our friendly finance representatives are here to help you with your purchase. We encourage customers to sit down with a finance representative to discuss their loan and insurance options. Come to us with your questions and concerns and a qualified finance representative will help you to figure out which purchasing plan is most beneficial to you. To learn more about Gap insurance and other information related to financing your next vehicle, visit Santa Barbara Auto Group and sit down with one of our finance representatives.
About Santa Barbara Auto Group
Santa Barbara Auto Group is located off the 101 and Hope Ave and serves Santa Barbara residents and drivers throughout Southern California as the premium dealer for Acura, Audi, BMW, Jaguar, Land Rover, Porsche, Mercedes-Benz, and Smart. Every Santa Barbara Auto Group employee is dedicated to providing the highest in sales and service assistance. Santa Barbara Auto Group represents eight different luxury brands and friendly experienced sales representatives are available seven days a week. To learn more about your favorite luxury vehicle, or to schedule a test drive, feel free to call, email, or visit Santa Barbara Auto Group.