When purchasing a new or late-model used vehicle, gap insurance — the coverage between the wholesale book value and the amount you would owe on the loan — is often discussed. When deciding if gap insurance is for you, consider these factors:
• Loan Length: a long loan term means more risk.
• Available Cash: do you have the funds to cover the gap?
• Mileage: vehicle value drops with excessive miles.
• Down Payment: smaller down payment means a bigger gap.
• Depreciation: quick vehicle depreciation leads to a bigger gap.
Before purchasing, it is beneficial to talk to your insurance agent about policy options.