And besides, sometimes financing the majority (or even all) of the purchase price just makes good sense. As an example, my dad wanted to pay cash for his last car, but his financial advisor asked him "Why would you want to pull $35k out of an investment account that's consistently earning 12-14%, just to avoid paying 2.9% on a car loan?" So my dad financed the car instead and came out several thousand dollars ahead in the end.

Everyone's financial situation is different, and it's wrong to assume that a buyer is overextending himself just because he chose not to put down a big down payment.

 

+1

 

Thanks for all of your replys. I will definitely have to take a deeper look over the policy before I decide to go with it. I just wanted to know if it was a waste. Since I will not be putting much down, I feel thus far that it would be in my best intrest to really keep an open mind to GAP. Everyone is talking about an additional 250+ a month for the coverage, but what I find strange is that FA said that it would only cost me $10 extra on top of my car loan monthly payment. Go figure.

 

I think a lot of the prices people have been quoting are "one-time" payments for the GAP insurance. Paying $250 a month just for the GAP insurance would be a pretty poor investment.

For a one-time payment of say, $275, the insurance company/credit union is basically betting that your car won't be totaled while you're still "upside down" on the car loan.

I don't know how often GAP claims are filed, or what the average payout is for each claim, but a one-time payment of $250-300 to "insure the gap" for the couple of years that you'll be upside-down sounds like about the correct level of risk, at least from the insurer's point-of-view.

 

^^ Very good piece of info to know. I was never told that it is a one time payment. All he said that I would pay 10 a month ontop of my monthly payment. So thats news to me.

 

Well, how you pay for it depends on where you get it. Obviously, rolling it into your car payment is only an option if you get the GAP insurance from the dealer. A third-party insurance company or credit union doesn't have that flexibility, so they'll just take it as a one-time charge.

One thing to keep in mind is that rolling the premium for the GAP insurance into your monthly payment also helps the dealer hide the true cost from you. It may only be "$10 a month", but I suspect that's $10 *every month*, for the life of the loan, long after you're no longer "upside down" on the loan and don't need the GAP insurance any more. Meanwhile, it's easy to miss the fact that their insurance will cost you almost $500 (in the case of a 4-year loan). If you're only talking about a two-year loan, then $10/month for the extra insurance is a good deal (only $240 total over the life of the loan).

 

the 275 I quoted was a one time payment. you could (at most credit unions) finance that into the loan if you wanted or you could pay it up front. dont forget that if you finance it, you also will be paying interest on it. just some things to consider.

 

I went ahead and got GAP insurance through the dealer. It really seems like a good idea to get it.

 

Congrats on the decision, hope you never need to use it.

 

^ +1

 

I stopped reading the thread here.
Buy good insurance like this dude. Gap insurance from the dealer is a scam.
My insurance replaces the vehicle, including mods.