Auto Loans With Gap Protection Are Essential
Doug Smith
Defined Tag: Auto Loans.
When you are in the office of the car dealership discussing terms for auto loans, the last thing you want to do is pay more for your new car than the price you just negotiated! However, there is one type of optional add-on or extra insurance that you should consider: gap protection. Most car buyers have never heard of gap coverage on car loans, and so are too quick to decline it.
Automobile loans that have gap protection are safer than those without it. This is especially true for longer-term loans. The gap refers to the possibility that your car may be stolen or totally wrecked before you have repaid the loan. Cars depreciate rapidly, starting when they are driven off the lot, according to some sources.
Assume during your car loan that your $28,000 new car is stolen. The insurance company says it was worth only $18,000 when it was stolen, and that is all they are willing to pay to replace it. Now you have no car to drive, and still owe $10,000 on a car you don't even have! The bank doesn't care. All they know is that you borrowed vehicle loan principal worth $28,000, and they expect to receive payments of $28,000 plus interest.
Gap protection on car loans is a type of insurance that would prevent the above problem from happening. If you had gap coverage on the money you borrowed, you would not be responsible for paying the remaining $10,000 on the loan. The longer the term of your loan is, the more opportunities for your car to be wrecked or stolen. Therefore don't be so quick to decline gap coverage offered by your bank or dealer. In fact, some lenders now insist that you obtain gap coverage on auto loans as a way of protecting their investments.
Copyright 2008 by Doug Smith. All Rights Reserved Worldwide. Unauthorized Duplication Prohibited.
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