Aug 07

Lease/Loan Gap Insurance?

GapIf you’re considering the purchase of a new car, when you near the end of the deal and sit down with the Finance Manager at the auto dealership, you’re likely to be encouraged to purchase Lease/Loan Gap insurance. What exactly is this, and how much should you pay for this coverage?

What is Lease/Loan gap coverage? – Most people know and understand that the value of the car will depreciate quickly after it is purchased.  If you are borrowing a significant portion of the vehicle’s cost, you’re likely to owe more than the auto’s value immediately after the purchase.  If you’re leasing the car, you will almost definitely have a “gap” between the value of the car and the amount you’ll owe the leaseholder.  That said, Lease/Loan Gap insurance is of value.

How much should you pay for this coverage? The price of this coverage can vary widely, depending on where you buy the coverage.  A standard price from a dealership would likely be between $500 and $1,000.  However, some insurance companies now offer similar coverage on your  regular auto insurance policy for around $1/month.  So, assuming you carry the coverage for 3 years, you’ll have only spent about $40 versus $500+ through the dealership.

So, the next time you purchase a car, don’t overlook the Lease/Loan Gap coverage…but buy smartly! Feel free to call or e-mail with any questions you have about this coverage.