What would you do if you got involved in an auto collision one week after you bought a brand new car? How about one month after? A lot of people think getting into an accident in less than a year after buying a car will never happen. The truth is that they just want to avoid these thoughts. A lot of people choose not to entertain unpleasant thoughts, which is the reason why many people opt not to obtain Guaranteed Asset Protection, or GAP insurance for their new car. Unfortunately, they end up paying for a loan on a damaged car, or worse, a totaled one.
You should know that lenders are not particularly concerned of your reason for a loan or what happens to your purchase after the loan. The only fact that they are concerned about is that you borrowed money from them and you are required to pay it back. This means that you have agreed to pay back the amount of your loan completely, even if your vehicle was a total wreck. This is obviously far from being a dandy situation. Now this is where the importance of having GAP insurance comes in.
The truth is that a lot of people are unaware that a brand new car’s value starts to diminish once it drives off the auto dealership. Within just a couple weeks of leaving the dealership, the value of a brand new car can diminish as much as thirty percent in extreme cases. You still need to pay this thirty percent from your own pocket, even if your auto insurance provider will shoulder the present Kelley Blue Book value of your car and will hand you a check to “total” your car. A GAP insurance coverage is available to cover that thirty percent and clear you out from the matter. This is the main reason why a lot of lenders require borrowers to get a Guaranteed Asset Protection insurance coverage as an essential part of their contract.
Think about this situation: if you get into an auto collision and your car is not under a Guaranteed Asset Protection insurance coverage, you are going to face the burden of a loan payment that consumes a great part of your resources. Most likely, you will not be able to get a replacement until you have completely paid off your damaged car. Not a good situation at all: no car, and no cash to get a replacement. Having a GAP insurance coverage might not be able to help you get a replacement, but it will increase your chances of borrowing another loan once you have settled everything.