• All Roads are Not Created Equal: Tips for Rural vs. Urban Driving
  • Pros and Cons of Buying a House Now
  • 7 Family Activities You Can Do While You're Working From Home During the Coronavirus Pandemic
  • 6 Home Organizing Projects to Keep Your Children Busy While You're Working From Home During COVID-19
  • 10 Tips for Staying Productive When Working From Home During the Coronavirus (COVID-19) Pandemic

Gap Insurance: What Is It & Do I Need It?

Sarita Harbour

Congratulations on your recent car purchase or lease! You’re probably thinking about driving your vehicle and not about the auto loan you took out to finance it. But what would happen if you totaled your car? Would you have enough money to pay off the loan?

In many cases, the answer is yes. Standard auto insurance can pay for covered repairs and even the cost to replace the vehicle if it is badly damaged or stolen. But sometimes the insurance money isn’t enough to pay off the loan. That’s because you can owe more than what your car is worth.

Why Is My Car Worth Less Than What I Owe?

The idea that you can owe more than what your car is worth may be difficult to wrap your head around, but this is a fairly common scenario. Industry expert Edmunds.com reported that during the first 9 months of 2016, 32 percent of all cars traded-in to buy new cars were “underwater.” This means that all of those cars were worth less than what their owners owed on their car loans—an average of $4,832 less!

Wondering how this happens? It’s easier than you think. Maybe you put little (or no) money down when you bought the vehicle, financing the bulk of your purchase, which added interest to the total cost of the car. Perhaps you even rolled in what you still owe on your previous car into your new loan. Or perhaps you took on an extended-term auto loan (i.e., one lasting 48 months or longer) to lower your monthly payments.

Doing any of these things means that less money goes toward the principal amount you borrowed, so it takes longer for your loan to shrink than it does the value of your car.

What Is Depreciation?

But why is the value of your car shrinking? Even as you’re making payments based on the value of your vehicle at the time you took your loan, your car is getting older and is worth less every day. This is due to depreciation. Read More

Recent Articles & News
  • All Roads are Not Created Equal: Tips for Rural vs. Urban Driving
    anemptytextlline
    anemptytextlline
  • Pros and Cons of Buying a House Now
    anemptytextlline
    anemptytextlline
  • 7 Family Activities You Can Do While You're Working From Home During the Coronavirus Pandemic
    anemptytextlline
    anemptytextlline
  • 6 Home Organizing Projects to Keep Your Children Busy While You're Working From Home During COVID-19
    anemptytextlline
    anemptytextlline
  • 10 Tips for Staying Productive When Working From Home During the Coronavirus (COVID-19) Pandemic
    anemptytextlline
    anemptytextlline
  • Business Continuity Planning in 4 Steps
    anemptytextlline
    anemptytextlline
  • Creating a Safety Culture in the Workplace
    anemptytextlline
    anemptytextlline
  • How to Onboard and Train Employees into a Safety Culture
    anemptytextlline
    anemptytextlline
  • An Engaged Workforce Can Improve Safety
    anemptytextlline
    anemptytextlline
  • Tips to Help Keep Employees and Visitors Safe in Parking Lots
    anemptytextlline
    anemptytextlline
  • 5 Tips for Childproofing Your Home
    anemptytextlline
    anemptytextlline
  • How to Prep and Open Your Pool for the Summer
    anemptytextlline
    anemptytextlline
  • Swimming Pool Safety Tips
    anemptytextlline
    anemptytextlline
  • Yard Safety
    anemptytextlline
    anemptytextlline
  • Tree Maintenance and Care
    anemptytextlline
    anemptytextlline
  • Summer Home Maintenance Tips
    anemptytextlline
    anemptytextlline
  • How to Help Prevent Heat Stroke
    anemptytextlline
    anemptytextlline
  • Types of Fire Extinguishers
    anemptytextlline
    anemptytextlline
  • How to Use a Fire Extinguisher [Video]
    anemptytextlline
    anemptytextlline
  • Cooking Fire Safety
    anemptytextlline
    anemptytextlline
  • The Science of Gas Grill Fires
    anemptytextlline
    anemptytextlline
  • Staying Safe in Work Zone Traffic
    anemptytextlline
    anemptytextlline
  • Share the Road
    anemptytextlline
    anemptytextlline
  • Car Safety Technologies that May Save Your Life [Video]
    anemptytextlline
    anemptytextlline
  • Choosing Safe Cars for Teens
    anemptytextlline
    anemptytextlline
  • How to Talk with Your Teen About Safe Driving
    anemptytextlline
    anemptytextlline
  • A Timeline for Getting Your Teen Driver on the Road Safely
    anemptytextlline
    anemptytextlline
  • How to Help Prevent Your Boat from Sinking
    anemptytextlline
    anemptytextlline
  • Developing a Storm Preparedness Plan for Your Boat: Tropical Storms and Hurricanes
    anemptytextlline
    anemptytextlline