I’m considering my options for GAP coverage on my 2022 Hyundai Santa Cruz, which has about 38,000 miles and a total loan amount of around $26,000. The dealership offers full GAP coverage for $115 a month, while Progressive provides partial coverage (up to 25%) for roughly $20 a month.
Is the higher cost of the dealership’s GAP coverage justified? I understand that it’s difficult to predict if or when it might be needed, but I also realize that if my car payments were lower, I could pay off the loan much sooner.
Any insights would be appreciated! Thank you!
When choosing between full GAP coverage from the dealership and partial coverage through your insurance, you’ll want to consider a few key factors:
Total Coverage vs. Partial Coverage: Full GAP coverage will cover the entire difference between what you owe on your car loan and the car’s actual cash value in the event of a total loss. In contrast, partial coverage (up to 25%) may leave you responsible for a portion of the remaining balance, which could be a significant amount.
Cost vs. Risk: At $115/month, the dealership’s GAP coverage is significantly more expensive than the $20/month option. However, if you’re in a situation where you could owe a substantial amount after a total loss, the full coverage could provide peace of mind.
Loan Amount and Vehicle Depreciation: Since you mentioned your loan total is about $26k and it’s a relatively new vehicle, consider how quickly vehicles lose value. Depending on your situation, the 25% coverage may not be enough if you were to total the vehicle early in your loan term.
Personal Financial Situation: If making lower payments could help you pay off your loan faster, that might be a priority. If you feel comfortable taking on a bit more financial risk, the cheaper option could make sense.
Insurance Requirements: Check with your insurance policy to understand specifically what the 25% coverage entails and if there are any exclusions or conditions that could affect your payout.
In summary, if you can absorb some financial risk and feel confident in paying off your loan quickly, the partial GAP coverage might suit your needs. However, if you’d prefer the security of knowing you’re fully covered regardless of vehicle depreciation, the dealership’s full GAP coverage could be a better choice. It ultimately depends on your comfort level with risk and your financial situation.