Do I Need a GAP Coverage Plan? | Dothan AL
Do I Need GAP Insurance in Dothan, AL?
While it’s always better to be more insured than less, it’s a good question to ask yourself when you’re considering a new Toyota from us at Toyota of Dothan! Many of our customers from Dothan, Ozark and Enterprise have asked themselves the same question, so our goal is that by the time you’ve finished reading, you’re clear on whether you need GAP insurance or not.
What is GAP Insurance?
Let’s start with the basics. GAP insurance, or General Asset Protection insurance, is defined by Car and Driver as the coverage for the difference between what your car is worth and how much you still owe on your car loan or lease. Everyone is required to purchase car insurance for their car, truck or SUV, but GAP insurance is only highly recommended. Why? It’s helpful coverage if a collision totals your vehicle but you still owe money on your loan. While your insurance company will cover what your model was worth, they will not cover what you still owe, creating a gap in coverage that you’ll have to pay. Need to see some figures? Check out the graph below.
Let's Look at the Numbers
Table from WalletHub’s “Gap Insurance Guide” article. Click for more details.
When Would GAP Insurance Apply to Me?
Not everyone needs GAP insurance. So how do you know when it’s best to purchase the extended insurance plan?
If you paid a low down payment and took out a large loan.
The more you have to finance to bring home your new Toyota, the longer it will take to decrease the gap between what you owe and the car’s depreciated value.
If your loan terms are fairly long.
The average car loan reaches 72 months according to Experian Automotive (some even reaching 84 months). The more time you have to pay off your loan, the longer it will be before your loan payments can catch up to your vehicle’s value.
If you purchase other service plans or add-ons at signing.
The more you add to your loan upfront (think: extended service agreements, dealer-installed options, debt from a previous auto loan), the more that you’ll increase what you owe on your model without actually increasing its value.
If you know your car will depreciate quickly.
If your vehicle depreciates quickly, the more likely it is that you’ll owe more on your loan than your model is worth. Sources like Edmunds and Kelley Blue Book® are reliable resources to check for an estimate on the depreciation rate of a model you’re eyeing.
If your model has high mileage.
If you’re driving more than 15,000 miles per year, you should consider GAP insurance. The more miles your vehicle has, the less that it’s worth.
If you leased your car.
Most leases will automatically include GAP insurance coverage since lessees will pay less on their loan’s principal every month with their lease payment. Ask our team if your lease includes GAP coverage!
If you're interested in learning more about GAP Coverage or would like to purchase a new vehicle, contact us or stop by Toyota of Dothan at 2285 Ross Clark Circle, Dothan, AL 36301. As always, we look forward to serving our customers from Ozark and Enterprise.