Aug 16 2010 8:31 AM

If I buy a new car should I also purchase GAP insurance?

If you finance a new set of wheels, you may need additional insurance if you owe more than your car is worth. The value of a new vehicle decreases about 20 percent as soon as you drive it off the dealer’s lot. This means if you make a low down payment, your loan could exceed your car’s value for a few years.

Guaranteed auto protection (GAP) insurance pays off the balance of your car loan if your car is stolen or totaled in an accident. Some insurance companies offer GAP insurance as a rider to an existing policy. In some states, insurers may automatically include it when you finance a new car.

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Laura Adams is a personal finance expert and award-winning author who is Senior Insurance Analyst for InsuranceQuotes.com. She represents Bankrate Insurance’s web properties in the media and works as an advocate to make sure consumers protect their financial futures by having the right kinds of insurance.

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