For many people, purchasing a vehicle—whether brand new or new-to-you—is one of the biggest financial commitments they’ll make. But here’s something many drivers don’t realize: the moment you drive your car off the lot, it begins to lose value.
According to industry experts, vehicles typically depreciate by about 20% in the first year alone, and then another 10% to 15% each year after that. This rapid depreciation can leave you financially vulnerable if something unexpected happens.
Where the “Gap” Comes In
Imagine this scenario: your car is involved in a serious accident and declared a total loss, or it’s stolen and never recovered. While your auto insurance will cover the vehicle’s current market value, that payout may be significantly less than what you originally paid—or worse, less than what you still owe on your car loan.
This is where Guaranteed Asset Protection (GAP) coverage steps in. GAP coverage bridges the difference between your vehicle’s market value and the balance remaining on your loan or lease. In other words, it helps ensure you’re not left paying out of pocket for a car you can no longer drive.
Who Benefits Most From GAP Coverage?
While GAP coverage can be useful for many drivers, it’s especially important if:
- You made a small down payment (less than 20%). A lower upfront payment means it may take longer for your loan balance to “catch up” with your vehicle’s market value.
- Your car loan has a long term (more than five years). The longer the loan, the more time your car has to depreciate before you’ve built much equity.
- You rolled negative equity into your new loan. If you still owed money on a previous vehicle and added that balance to your new loan, GAP coverage can help protect you from owing even more if your car is written off.
Why It Matters
Without GAP coverage, drivers may face thousands of dollars in out-of-pocket expenses if their vehicle is totalled or stolen. For many households, this unexpected cost can create a significant financial burden.
With GAP coverage, however, you have the peace of mind of knowing that you’re protected from this risk. It’s an affordable option that can provide valuable protection for years to come.
Your vehicle is an investment, and protecting yourself against financial loss is just as important as protecting the car itself. GAP coverage offers a safety net that standard auto insurance doesn’t, ensuring you’re not left with a loan balance after a total loss.
If you’d like to learn more about GAP coverage—or review your current auto insurance to make sure you’re fully protected—reach out today. We’d be happy to walk you through your options and help you find the right coverage for your needs.