I’m trying to decide between getting total GAP coverage from the dealership for $115/month or opting for partial coverage through my insurance for about $20/month (covering up to 25%). I have a 2022 Hyundai Santa Cruz with around 38,000 miles, and the total loan amount with dealership GAP coverage is about $26,000.
The dealership’s GAP coverage is comprehensive but costs $114 each month, while Progressive offers partial GAP coverage for around $20 monthly.
Is the extra expense for the full GAP coverage justified? I realize it’s tough to predict if and when situations will arise that make it worthwhile, but if my monthly payments were lower, I’d be able to pay off the loan much sooner.
Thanks for your advice!
When deciding between full GAP coverage from the dealership and partial coverage through your insurance, there are a few important factors to consider:
Total Coverage vs. Partial Coverage: The dealership’s GAP coverage will pay off the entire loan balance if your vehicle is totaled or stolen, which can provide peace of mind in the event of a total loss. On the other hand, the Progressive option that covers up to 25% means you’re still responsible for a portion of the loan in the event of a total loss. If your car’s value decreases rapidly or if you have a significant amount left on your loan, this might leave you with a gap to cover.
Cost and Budget: The dealership’s GAP coverage is significantly more expensive at $115 a month compared to Progressive’s $20 a month. If budgeting is a concern and you’d prefer to allocate those funds towards paying off your loan faster, the lower-cost option might be more appealing.
Loan Balance and Depreciation: Consider how much your vehicle is worth compared to the loan amount. Since you mentioned the loan is about $26k, if the car depreciates and your insurance pays less than your loan, the dealership’s coverage might be more beneficial if it provides full coverage. Research the likely depreciation for a ’22 Hyundai Santa Cruz to make an informed decision.
Your Driving Habits: If you drive a lot or in areas where accidents are more likely, higher total coverage may make more sense. Conversely, if you drive conservatively or not very far, you might feel more comfortable with lesser coverage.
Loan Terms: If your loan terms allow for early payment without penalties, it might be worth focusing on the lower monthly payment option to reduce your overall debt quicker while spending less.
Ultimately, the decision should reflect your risk tolerance, financial situation, and how much peace of mind you value in this scenario. If you lean towards minimizing costs and feel comfortable with taking on some potential risk, the partial coverage could be a solid choice. If you prefer maximum protection and are willing to pay more for peace of mind, then the full coverage might be worthwhile.