GAP insurance was famous in the past decade and known to save people thousands of dollars during really bad accidents when their loans exceeded the value of their cars. The rules are changing quickly thus making GAP insurance completely useless. Here is how GAP insurance works and why its has no worth for our Insiders.
What is GAP insurance?
When you buy and finance a car, there is a certain dollar amount you finance. In most cases, that amount is higher than the real cash value of the car (refer to our article on what is my car worth). When an accident or a total loss occurs, the insurance company (like Nationwide) typically pays to replace your car or pays out the cash value of it at the time of the accident.
This means that you are often left with a balance to pay at once even though the car is completely gone. This is when having GAP insurance helped, because they would cover the difference and you would be off the hook. Unless your car was completely totaled, the GAP wouldn’t kick in and would never apply. GAP was useful when uneducated buyers bought cars at much more expensive prices than their worth; sometimes 20% above their value.
Why is GAP irrelevant to our Insiders?
Since we teach people to buy luxury and exotic cars at rock bottom prices and how to leverage bank money to do it, we are ultimately helping people purchase at figures much lower than what a car is worth.
In case your car is totaled, the insurance company would give you more than what you bought the car for, and your loan would have no relevance as you would most likely get your money back too, including your down payment.
You cannot actually buy GAP insurance when your loan value is below 90% of the car’s value, yet the dealers still sell it on the basis that most people won’t pay attention.
Understand how GAP insurance works and instead of investing $499 on your next GAP purchase, invest 50% of that into an Insider Membership that will save you thousands over time.