Is "GAP" coverage worth it? I purchased my truck recently and the finance guy talked me into the gap coverage. It cost 500 bucks and now in hindsight I'm second guessing my decision. What do you think, is it worth it?

 

Depends on what percentage down you have against the value of the truck and how likely you are to be upside down in the loan if you were to have an accident that totals the vehicle. With longer term loans and lower amounts down you're more exposed. Not sure if you can cancel it but, but credit unions often have better rates on Gap coverage.

 

Only if you have an accident that totals your vehicle and your equity is not enough to cover your loss.

 

Not to me. Of course, I have never financed every penny of a new vehicle.

 

I would be upside down a little, I think, if I had a total loss. I may call the dealer to see if I can get a refund against my loan.

 

If you've overextended yourself on a loan and would be underwater and unable to cover the difference in a loss, then sure it makes sense. Then again if that is the case, you probably shouldn't have got the truck at all.

 

I added GAP coverage with my auto insurance carrier. I added OEM parts while I was at it. Increased my annual insurance about $62 total. Called the dealership I purchased the GAP with at signing, cancelled. Got a pro rated refund that was close to the initial cost.

That said, the financing is still the same if you rolled it into the loan at signing. It does not change. For those that are paying interest, they need to remember that portion...

 

If you would be upside down even a little I would keep it. $500 added to your loan payment is very minimal (like $8/month) depending on your rate and loan length.


Basically, the only time you need gap is when you aren't putting a large chunk cash down payment. Either through a trade in, or out of your pocket, or both. Rebates alone are never enough to make up for depreciating value.

For example, my MSRP was 54K and I financed ~28K after rebates, trade in and out of pocket money down. So no, I will never need gap insurance because the depreciating value of my truck will never dip lower than what I owe on it, even after the "hit" my truck takes after driving off the lot. If I just use leasing residual values as a reference, after 3 years my truck will be worth around ~36K probably but I will only owe ~14K on it.

But if you owe close to what your truck is worth, then I recommend gap.

 

Insurance companies are in business because they make money off consumers. If you can afford to take the risk yourself, you'll be better off. That being said, I personally don't think someone should be buying a new $50k truck if they finance the whole thing (hence the risk). Good luck.

 

The only time you'll need the insurance is when it's too late to get it. In your situation, I would go ahead and keep it.