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Author: admin | Category: Loan Calculator Canada | Date: 17.08.2014

Assuming they take a loan for 48 months, the buyer may find themselves about two years later with 40,000 miles on the odometer and a $12,000 balance left on the loan.
Chances are, because of the loan amount and where they are in the payment process, the car is worth less than the outstanding financed amount. That’s where gap insurance comes in as it pays off that $2,500, clearing the books on the loan and allowing the consumer to put all of their purchasing power towards buying a new car.
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Some drivers assume comprehensive and collision coverage offers full protection if their car is stolen or totaled. Gap insurance covers the difference between what you owe on your car and what your car insurance company is willing to pay for it — without any maximum payout stipulation. Alternatively, you can purchase gap insurance at your dealership, though this is likely to cost you significantly more.
Therefore, you’re likely to save a lot by purchasing gap coverage through your car insurance company. Given the nature of lease contracts, gap insurance is particularly important for those leasing a car — so important that most lease contracts include gap insurance by default.
Once you have gap insurance, monitor your car’s changes in value (depreciation tends to slow after the first few years of ownership) and your decreasing loan balance.
This type of coverage can be a good option when a large percentage of your car’s purchase price is financed or if you are leasing. An automobile may sell for $24,000 with the buyer putting $4,000 down and financing the rest.

If they are in an accident and their car is declared totaled, the insurance company will pay them what the car is worth at that time. These people may have never had to finance the purchase of a motor vehicle or they have financed a very small percentage of the loan. Utilizing an online site that can connect you with quality providers can be a big help in ensuring that you get value on the dollar. We get thousands of visits everyday and our posts spark diverse active discussions among visitors. But if they’re financing or leasing a new car and experience a total loss, they could be in for a rude awakening. If you financed a new car, chances are this gap will linger for a couple of years, leaving you responsible for the difference in the event of a total loss. Many dealerships sell gap insurance coverage for an average of $500 to $1,000, and they often require a large payment upfront. CharlesStatements on this website as to policies and coverages and other content provide general information only and we provide no warranty as to their accuracy.
The point of this type of car insurance is to make up for the “gap” between how much you still owe on your car and what it is actually worth.
By financing $20,000, which is about 85% of the purchase price, the buyer leaves a considerable amount of the balance unpaid. If that’s the case, the owner still has a balance of $2,500 for which they are responsible.
It offers the car purchaser additional protection that they cannot get from liability, collision or comprehensive insurance.
Overall, this type of car insurance coverage is relatively new, as over the past 40 years or so car financing has changed a lot where car dealerships loan providers and consumers have been willing to finance a higher percentage of a motor vehicle’s purchase price.
If you’re taking out a car loan and financing a large percentage of the purchase price or leasing a vehicle, then a good gap policy is a necessity.

If you want to buy a new car, we help make your choice easier by our expert reviews and comparisons. In our comments section, you can provide feedback on all our articles, and our experts or fellow auto geeks would respond to each query you may have.
You breathe a sigh of relief before looking at your latest loan statement … and gasp when you see that you still owe $28,000 on your car!
Eventually the difference in these totals will vanish, but in the meantime, gap coverage protects you from having to cover the difference. Where the coverages differ is in the amount they’ll provide in the event of a total loss. If it doesn’t, consider adding it to your regular car insurance policy as soon as possible.
It’ll add a few more dollars to your monthly or biannual payment, but it could potentially save you thousands. Many car insurance companies will alert you when you no longer need this coverage, but it pays to keep track yourself. Clients should consult with their licensed agent as to how these coverages pertain to their individual situation.
Even if you never have to use your gap coverage, and chances are you won’t have to, knowing that you do have the necessary coverage is worth the price. Typically, depending on financing considerations and other factors, gap insurance is relatively inexpensive. We have no control over those sites or vendors and cannot, therefore, endorse nor guarantee the accuracy of any information provided by those sites or the services provided by those vendors.

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