It is insurance coverage that will step in and pay your lienholder off in the event your vehicle is totalled and you owe more than it is worth (which is often the case with vehicles).
This is just my thought, not saying that everyone should do this. When we bought our lastest vehicle (used), we made sure to get a short term on the loan and negotiated a price well below blue-book value. That way there was no danger of ever being upside-down. I saved a bundle on interest, and there was no need to buy the extra insurance. I guess my point is, if there is a good chance of needing gap insurance, then I wonder if your deal/financing is really the best you can get? IMHO, I cannot imagine making a purchase that I could reasonably expect to be upside-down on.
Last January my BIL was in a MAJOR car accident (he was fine, thank goodness!). He had gap insurance on the car he had. Well, it is almost November and he is STILL fighting with them to get the payoff. He is making a car payment on the remaining balance of the car (minus what insurance paid) while they decide whether or not they're going to pay. Someone ran a red light and he hit them. They are giving him the run around. He said he'd NEVER do gap insurance again. They'll say whatever they think you want to hear, b ut actually getting them to pay is another deal. They were very kind and helpful when the accident first happened and now? Now they are terrible to talk to. BIL, his insurance company and even the officiers who responded to the accident have sent paperwork, called, etc. They won't pay.
I'm all for gap insurance, and so is my DH who isn't 'FOR' anything "extra" at all. In 2002 we bought a brand new minivan. Less than a month later, well before the first payment was even due, someone ran a stop sign and I couldn't see them coming to react thanks to a field full of corn. My brand new car was totaled, and we didn't have gap insurance. The other driver's insurance company offered us a whopping $8,000 less than we owed!
The story has a happy ending, though. I must be the only person in the world that has every gotten one over on an insurance company. I laid into that adjuster pretty good after he shot that number back at me. Then I called the lot where the car was sitting and submitted to them on the phone and then in writing that they were not allowed to release my car under any circumstances to the insurance company until they had my written permission. (They wanted to tow if off immediately, but until we had an agreement I still owned it and didn't want the evidence disappearing on me). Long story short, they ended up paying for our rental car for nearly three weeks, paid my loan off completely, and had to pay the wrecker a good two weeks' worth of storage fees for their lot (at $70/day) because I would not BUDGE until I won. He threatened me with some sort of "impeding resolution" claim, but I stuck to my guns anyway. I told him I was being much more reasonable than HE was and after DH and I finally signed off on the papers regarding the vehicle he told DH "Your wife is something else, and I'm glad I don't live with her." LOL. And for the record, the tow lot actually called me when the insurance co went to pick up the car to verify that it was okay. Gotta love that!
I think it's not so usual to win that argument, though. The accident was in no way my fault, but they still tried to screw me. Gap insurance would have made that whole thing a lot less of a nightmare.
Goal: Debt free by January 2010 so we can build our dream home!
It is insurance coverage that will step in and pay your lienholder off in the event your vehicle is totalled and you owe more than it is worth (which is often the case with vehicles).
This is just my thought, not saying that everyone should do this. When we bought our lastest vehicle (used), we made sure to get a short term on the loan and negotiated a price well below blue-book value. That way there was no danger of ever being upside-down. I saved a bundle on interest, and there was no need to buy the extra insurance. I guess my point is, if there is a good chance of needing gap insurance, then I wonder if your deal/financing is really the best you can get? IMHO, I cannot imagine making a purchase that I could reasonably expect to be upside-down on.
Marissa
I would get gap insurance.
Gap insurance is the only insurance I ever add to a car loan.
I'm all for gap insurance, and so is my DH who isn't 'FOR' anything "extra" at all. In 2002 we bought a brand new minivan. Less than a month later, well before the first payment was even due, someone ran a stop sign and I couldn't see them coming to react thanks to a field full of corn. My brand new car was totaled, and we didn't have gap insurance. The other driver's insurance company offered us a whopping $8,000 less than we owed!
The story has a happy ending, though. I must be the only person in the world that has every gotten one over on an insurance company. I laid into that adjuster pretty good after he shot that number back at me. Then I called the lot where the car was sitting and submitted to them on the phone and then in writing that they were not allowed to release my car under any circumstances to the insurance company until they had my written permission. (They wanted to tow if off immediately, but until we had an agreement I still owned it and didn't want the evidence disappearing on me). Long story short, they ended up paying for our rental car for nearly three weeks, paid my loan off completely, and had to pay the wrecker a good two weeks' worth of storage fees for their lot (at $70/day) because I would not BUDGE until I won. He threatened me with some sort of "impeding resolution" claim, but I stuck to my guns anyway. I told him I was being much more reasonable than HE was and after DH and I finally signed off on the papers regarding the vehicle he told DH "Your wife is something else, and I'm glad I don't live with her." LOL. And for the record, the tow lot actually called me when the insurance co went to pick up the car to verify that it was okay. Gotta love that!
I think it's not so usual to win that argument, though. The accident was in no way my fault, but they still tried to screw me. Gap insurance would have made that whole thing a lot less of a nightmare.
Goal: Debt free by January 2010 so we can build our dream home!
over 40 and tired