Top 5
Reasons You Must Have GAP
Insurance
Vehicles are getting more and
more expensive, but customers are
still expecting, wanting or even
needing the lowest monthly
payments possible. Outside of
negotiating the best possible
deal and putting significant
money down, consumers are left
with one option to keep those
payments low and that is
extending their finance term to
72, 84, or even 96 months.
What some consumers are not
aware of is the rude awakening
they might be in for if they
don't have GAP Insurance to
protect themselves.
GAP Insurance is quickly
becoming one of the most popular
forms of protection for customers
that choose to finance their
vehicles. GAP stands for
Guaranteed Asset Protection and
can become a financial life saver
in the event your vehicle is
declared a total loss, due to
collision or theft, by your
insurance company.
It is designed to payoff any
outstanding balance owed on your
vehicle after the insurance
company has determined their
settlement. Essentially, your
insurance company is going to
determine an Actual Cash Value
(ACV) of your vehicle at the time
of loss and factor their
settlement on that value.
As many people are learning
these days, they owe more to the
bank than what their vehicle is
worth. This is where GAP
Insurance comes into play. GAP
will cover that deficiency (your
negative equity) and usually your
insurance deductible as well.
Long term financing will
affect the amount of negative
equity you have in your vehicle,
as well as the length of time you
will have negative equity in your
vehicle.
The
top 5 factors affecting your
negative equity are:
1) Depreciation
The longer your loan term, the
more time there is for the
vehicle to depreciate. There are
very few vehicles that go up in
value as they get older.
2)
Amount of miles on the
vehicle
The longer you own the vehicle
the more miles you will rack up;
therefore, causing even more
depreciation.
3)
Finance charges
Not only will you be paying
more in finance charges due to
the longer term, but you will pay
a higher interest rate due to
lender risk. The longer the term
of the loan the higher the risk
for the lender and that
translates into higher interest
rates.
4)
Little money down
If you put little or no money
down, you are now, not only
paying finance charges on the
purchase price of the vehicle,
but potentially on the tax, title
and license.
5) You
rolled over negative equity from
a trade in
This is a bad one and can put
you in a very inequitable
situation.
My suggestion would be to not
finance a vehicle long term. The
longest term I would suggest is
48 months with a 30% down
payment. I know this is not
possible for most consumers with
the price of vehicles these days,
but if you can afford the monthly
payments it is the best way to
go. For those of you forced to
finance long term with little
money down, GAP insurance is a
must.
Justin is the creator of
http://www.InsiderCarBuyingTips.com
He is a Car Buying, Bad Credit
Repair and Auto Loan Finance
authority. In addition to
offering the most informative car
buying tips on the Internet, he
offers the least expensive
A-(excellent) AM Best rated
[http://InsiderCarBuyingTips.com/auto_warranty]Extended
Auto Warranties online, direct to
consumers and has partnered with
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source.
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