If the price is reasonable, I usually add it on. If I happen to trade the car in a few years later, I usually cancel it and get refunded the difference.

 

Would you say $850 is reasonable?

 

Yes, it’s reasonable.

 

No it's not. An let's face it, you are more than a BIT biased here..

 

Absolutely not. If you really think you need it, talk to your auto insurance provider, it is significantly cheaper and easy to cancel whenever you want. $850 is a big, round number that was picked from the dealership greed tree.

 

It will most likely be cheaper through your insurance company. I had it on my 2015 Sonata (lease) and it was less than $50/yr.

 

Agreed, I think for past cars it was $25-$40 per year, easily removed and with it connected to your actual auto insurance, likely easier in the claims process if something went horribly wrong. For most people who finance, they are only underwater (if at all) for a year or two at most.
Just throw a reminder in your phone calendar to remind you to check it in a year or two and you can see if you have negative or positive equity so you can cancel or keep it.

 

Differences between your insurance GAP and a third party are following:

1. Total conflict of interest. If you get into a wreck, what do you think your insurance will use to determine if the vehicle should be totalled or not?

2. You still have to pay your deductible on a GAP claim thru your insurance company ($500 for average customer). Most 3rd party GAP providers pay for your deductible up to $1000. So that $40 a year is no longer the case.

3. If you cancel your insurance policy with your provider guess what else is lost? Your GAP coverage. Some insurance companies don’t even offer GAP.

I know this because i work at a dealership and have seen the ugly side of average insurance company GAP. Some are not even true GAP policies, they give you a prorated amount to find a similar used vehicle. Try rolling in negative equity, you can bet they won’t cover that either. They’ll pay up to a 100% of the vehicle value. You still have to cover the negative from the previous loan.

I hope that helps a bit.
Cheers.

 

I agree with most of what you are saying, but gap insurance purchased at the dealer will absolutely not cover negative equity on your vehicle.

 

First of all congrats, That's a great deal.
I was offered a bit more than $8 a month for 72 months on a 23k loan. That comes to around $600. I declined it. The MSRP on my car was 28k and my loan was for 23k with 0 APR. The car was a dealership loaner with 5k miles.

If my car gets totaled today I might be on the hook for <$2000. As I keep making payments that GAP will shrink. I wasn't going to spend $600 to insure $2000 on a worst case scenario. It also depends on how much you drive a year and how much risk are you willing to take. Ultimately the decision is yours.

 

Finance guy tacked on an extra $850 for GAP insurance which he said I can call within 30 days to get a refund if I don't want it.

MSRP on my car is $32K. Got them down to $25.5K sale price + traded in $4K car which took care of tax/title/tag/dealer fee so my OTD price was $24.9K financed.

It is my understanding that the GAP insurance covers the difference on what the insurance pays (market value) vs amount left on the loan if the car is totaled.

In my situation I feel like since I got such a good deal on the car that my insurance provider should be covering the full amount as the market value is very close to the loan amount.

The GAP price is $850 added onto the financing and with 3% APR it comes out to ~$910 over the span of the 72 month loan so ~$12.50/month.

Is it worth it or should I cancel and get a refund?

The refund does not lower my monthly payment amount, just lessens the time to pay off (now it will be a ~70 month loan essentially).

Also, my car insurance provider does not offer GAP (Gieco in FL).

View attachment 459079

I purchased mine through the bank! $405.00 where I got mine financed. All banks have it.

 

You got a good discount on MSRP so any negative equity will only be until the 3rd or 4th year of the loan

Some good information on GAP insurance.

 

I was in the auto business for a long time in the finance office. I would add gap if I had a trade that I was upside down. Like it's worth $4000 but owe $8000. It looks like you had a $4000 trade and a good discount on your new car and your amount financed is 7k lower than MSRP. Your Loan to value is just under 80% that sit's on the border line of personal peace of mind. Chances are you would be ok. As explained in other post's you can get gap from some insurance company's. I have Progressive and pay about $7 a month for what's called lease/loan payoff, Geico, State Farm, NJM now offer gap but yes you would still pay the deducible. If you are happy stay with the dealer gap but remember as you pay your loan down your need for gap will diminish. Remember you can cancel it at any time but your payment will stay the same and the gap refund would go to the principle of the loan. Congrats on you new ride. Enjoy.

 

I was in the auto business for a long time in the finance office. I would add gap if I had a trade that I was upside down. Like it's worth $4000 but owe $8000. It looks like you had a $4000 trade and a good discount on your new car and your amount financed is 7k lower than MSRP. Your Loan to value is just under 80% that sit's on the border line of personal peace of mind. Chances are you would be ok. As explained in other post's you can get gap from some insurance company's. I have Progressive and pay about $7 a month for what's called lease/loan payoff, Geico, State Farm, NJM now offer gap but yes you would still pay the deducible. If you are happy stay with the payday say legit dealer gap but remember as you pay your loan down your need for gap will diminish. Remember you can cancel it at any time but your payment will stay the same and the gap refund would go to the principle of the loan. Congrats on you new ride. Enjoy.

Thanks for explaining everything.

 

Finance guy tacked on an extra $850 for GAP insurance which he said I can call within 30 days to get a refund if I don't want it.

MSRP on my car is $32K. Got them down to $25.5K sale price + traded in $4K car which took care of tax/title/tag/dealer fee so my OTD price was $24.9K financed.

It is my understanding that the GAP insurance covers the difference on what the insurance pays (market value) vs amount left on the loan if the car is totaled.

In my situation I feel like since I got such a good deal on the car that my insurance provider should be covering the full amount as the market value is very close to the loan amount.

The GAP price is $850 added onto the financing and with 3% APR it comes out to ~$910 over the span of the 72 month loan so ~$12.50/month.

Is it worth it or should I cancel and get a refund?

The refund does not lower my monthly payment amount, just lessens the time to pay off (now it will be a ~70 month loan essentially).

Also, my car insurance provider does not offer GAP (Gieco in FL).

View attachment 459079

I have it but mine is through my auto insurance; it paid off on a past car…but I lease so it was more beneficial because of that

 

Here is what the Washington State Insurance Commissioner has to say about GAP insurance: Gap insurance | Washington state Office of the Insurance Commissioner
Of course, this is the same elected official who directed that insurance companies can no longer use your credit rating as a factor to determine insurance premiums. As a result, those of us with good credit scores pay a higher premium to offset the risk of insuring those with a low credit rating.

 

Here is what the Washington State Insurance Commissioner has to say about GAP insurance: Gap insurance | Washington state Office of the Insurance Commissioner
Of course, this is the same elected official who directed that insurance companies can no longer use your credit rating as a factor to determine insurance premiums. As a result, those of us with good credit scores pay a higher premium to offset the risk of insuring those with a low credit rating.

LOL....oh we could get into a fun argument about "credit scores" and why they should not be used as the be all, end all determination of what someone should pay, but I will leave that for another thread...

 

My bank charged 480.00 for GAP. Never purchase at dealership.

 

I went to my credit union and they were offering my gap insurance for $450, I told the dealer/finance guy and he dropped their gap insurance to match what my credit union was giving it to me for. My dealers was also $850 by the way.