Is Gap Insurance a Waste Of Money?

Today, we’re talking about whether or not gap insurance is a waste of money. Gap insurance is only a waste of money if you are not financing your vehicle, or if you are able to afford the difference between your car loan or lease balance and the actual cash value of your car. 

Gap insurance is never mandated by state law, and it is rarely required by lenders or lessors. Thus, it is up to you to decide whether gap insurance is worth the cost in your situation. To help you make that decision, let’s go over a few situations where Gap insurance is a waste of money. 

First, gap insurance is likely to be a waste of money if you are buying a used car. Used cars retain more of their value after purchase than new cars, so the gap between the loan or lease and the actual cash value of the car will be small. Therefore, you might be wasting money if you buy gap insurance on a used car. 

Second, gap insurance is not worth the money if you make a large down payment on your car. If you purchase a car for $35,000, for example, it’s actual value could fall to $29,000 in a year, leaving a gap of $6,000. But if you make a down payment of $6,000 or more and your loan balance remains below the depreciating value of your car, then gap insurance is unnecessary. 

Third, if you can cover the gap between your car’s value and your loan or lease, you do not need gap insurance. If it’s not too much of a burden, paying the gap out of pocket is the better option, as you will not have to pay for insurance. 

Finally, if you would be paying the same amount for gap insurance as the gap in coverage itself, it makes more sense to skip the coverage and pay out of pocket if your car is totaled. Ultimately, whether gap insurance is a waste of money depends on your individual situation. In many cases, gap insurance may be an unnecessary expense. 

However, if you find that gap insurance isn’t a waste of money, I hope you enjoyed this session on everything you need to know about Is Gap Insurance a Waste Of Money? So always be sure to contact a professional before making any financial decisions.