I’m trying to decide between two GAP coverage options for my 2022 Hyundai Santa Cruz, which has around 38,000 miles on it. The dealership offers total GAP coverage for $115/month, bringing my loan amount to about $26,000. On the other hand, Progressive provides partial GAP coverage for up to 25% of the loan for about $20/month.
Is the more expensive GAP coverage from the dealership worth it? I understand it’s tough to predict whether it will be beneficial, but with lower car payments, I’d have the ability to pay off the loan much sooner.
Any insights would be appreciated! Thanks!
When deciding between the dealership’s full GAP coverage and the partial coverage through your insurance, there are several factors to consider:
Type of Coverage: The dealership’s GAP coverage typically covers the entire difference between your loan balance and the car’s actual cash value in the event of a total loss. In contrast, the partial coverage from Progressive only covers up to 25% of the loan balance, which might not be sufficient if your car depreciates significantly or if you still owe a substantial amount on your loan.
Cost vs. Risk: While the dealership’s coverage is more expensive at $115/month compared to $20/month for the partial coverage, think about your financial risk. If your car were totaled, the full GAP coverage could save you from a potentially large out-of-pocket expense, especially if the depreciation on your vehicle is steep.
Loan Amount: Since your loan total is $26k, if the car’s value were to drop quickly, the potential gap could be larger than what the 25% coverage would provide. Assess the depreciation curve for your vehicle and consider how it might impact you financially.
Financial Flexibility: If you can afford the extra cost of the full coverage without straining your budget, that peace of mind may be worth it. On the other hand, if reducing monthly expenses is a priority for you, the partial coverage may be sufficient as long as you understand its limitations.
Other considerations: Also consider how long you plan to keep the vehicle and whether you can comfortably cover any potential gaps yourself if you were to choose the less expensive option.
Ultimately, it comes down to your appetite for risk and budget constraints. If you feel more comfortable with the full coverage for the peace of mind it offers, it might be worth the extra cost. If you think the risk of needing that full coverage is low, the partial option could save you money in the long term.