What is Gap Insurance On A Leased Vehicle?
Leasing rather than buying has become a popular choice for many long time car buyers. Leasing usually doesn’t require a large down payment and sometimes offers the ability to drive a more expensive vehicle you otherwise could not afford when buying. For those that do lease, Gap Insurance is something hopefully you have heard about, but might not fully understand. Here are the facts.
So What Is Gap Insurance
Plain and simple Gap Insurance covers the difference between what your car is worth and what you still owe if the car is totaled do to an accident. If you get in an accident the insurance company may determine that your leased, or even financed vehicle will cost more to repair than it’s worth. The car insurance company will establish a pre-accident value on your damaged vehicle and deduct that value from your remaining lease or loan payments. If you still have payments due after they deduct the value you have a gap.
Most often the gap is usually small, however, the closer to the start of your car lease or loan the larger the gap could be. Each vehicle has its own depreciation schedule so depending on the vehicle the gap could be larger for some than others. It’s best to carry gap insurance just in case.
Where Do I Buy Gap Insurance
Car dealers will offer to sell you gap insurance when you lease a vehicle. Some may even provide it as part of the lease agreement at no extra cost. I sometimes come across situations when a dealership boldly tells my clients there coverage is more broad, or has a better chance of paying out compared to coverage elsewhere. In my experience gap insurance offered by the dealership is often significantly more expensive than the same coverage you can get through your insurance agent. And there’s no difference in coverage or less chance in coverage not paying out. Whats more, we can offer additional benefits, such as accident forgiveness, rental and towing coverage in addition to gap insurance for less than what dealerships often charge for just gap insurance!
So when you go to lease that next vehicle ask about gap insurance. It’s important to have when leasing a vehicle. Ask if it’s included as part of your lease, or what it costs to pay for it separately. Then ask your insurance agent the same question. I think you’ll be surprised and glad you did!