It’s something we never hope will happen but unfortunately you have a 1 in 114 chance of getting into a car accident. While we would assume that our insurance would cover all of the damage and medical bills, odds are some of the cost may not be covered.
Getting in an accident can be stressful, but it can be even worse when you owe more on your auto loan than what your insurance is willing to pay. That’s where GAP insurance can save you.
GAP insurance was created to literally fill in the GAP between how much you owe on your auto loan and what the insurance company will actually pay you on the value of your car.
How does GAP insurance work?
It’s not too complicated, let me break it down for you with a real world example.
Let’s say you bought a used car from your good buddy Tim through FlipRide. A short time later you get into a crash and the car is totaled. At the time you owe 12,000 on the car, but the current value is only $9,000. Your insurance company would only cover the $9,000 value of the car, minus your deductible. That means if you don’t have GAP you would personally have to pay the $3,000 out of your pocket. GAP insurance pays that $3,000 so you don’t have to.
Why would I need GAP Insurance?
GAP insurance is not required but if you find yourself in any of these situations when financing your car, then you should consider purchasing GAP.
You made a small down payment or even 0 down.
When you make a small down payment or even $ down. Your car will be worth less than what you own almost immediately.
Your car depreciates fast.
Some vehicles tend to hold their value and depreciate slowly. Like a Jeep Wrangler or Ford truck. However, most cars will depreciate very fast. If you’re not making large enough payments or put a lot of miles on your vehicle, you could become upside down very quickly.
You traded your old car to a dealer.
If you traded your car to a dealer and bought something newer then you run the risk of being upside down in this car. A dealer will not give you as much on trade-in. This is why we suggest you sell using FlipRide. We help you get more $$$ for your car.
Your loan term is over 60+ months.
If you decide to finance your car on a longer term, you typically will have a higher interest rate. If the loan is over 5 years and you put little down, then your payments could potentially never catch up to the value of your car in the current market.
You put a lot of miles on the car, fast.
The more miles you put on a car the less it is typically worth. If you drive your car more miles than average you will more than likely run the value down to less that what you owe very quickly.
You have a high interest rate.
If you’re interest rate is on the hight side, I would say above 5-7% then you’re more than likely going to be upside down if your car is a total loss.
How to get GAP insurance for your used car.
Shopping for GAP Insurance can be very stressful, but it no longer has to be. This is why we do what we do on a daily basis. You can buy GAP insurance for your private party used car purchase in minutes directly through FlipRide! Just grab your keys, get your GAP and drive with confidence knowing you and your wallet are fully protected.
See how FlipRide works in this quick demo!
GAP insurance is not needed if you purchased your car in cash or put a large amount of money down. But if you find yourself in a situation where you run the risk of being upside down in your car, then GAP insurance should be something to consider.
FlipRide helps you purchase GAP insurance right from our app. Just pick your plan after getting the keys to your new ride and you’ll be covered in minutes.