I’m trying to decide between two GAP coverage options: the full coverage from the dealership at $115 per month or a partial option through my insurance for about $20 per month, which covers up to 25%. I have a 2022 Hyundai Santa Cruz with around 38,000 miles on it, and my total loan with the dealership’s GAP coverage is approximately $26,000.
The dealership’s GAP coverage is comprehensive at $114 per month, while Progressive’s offers partial protection for roughly $20 per month. Is the higher-priced GAP coverage worth the investment? I understand it’s hard to predict if it will be necessary, but if my monthly payments were lower, I could pay off the loan much faster.
Thanks for your insights!
When deciding between full GAP coverage from the dealership and partial coverage through your insurance, there are a few factors to consider:
Coverage Amount: The dealership’s GAP coverage is full coverage, meaning it will cover the entire difference between what you owe on your loan and what the car is worth in the event of a total loss. On the other hand, the partial coverage through your insurance only covers up to 25% of the total loan amount. If your car depreciates significantly, you could end up owing more than the coverage provides.
Cost-Benefit Analysis: While the monthly cost of the dealership’s GAP coverage is higher, it offers more comprehensive protection. Consider how long you plan to keep the car and the likelihood of it being in an accident or getting stolen. If you think there’s a higher risk or if you plan on keeping the car for a while, full coverage might be more beneficial.
Monthly Payments: You mentioned that if your payments were lower, you could pay it off sooner. The lower costs of the partial GAP coverage could allow you to allocate more towards your principal, but weigh this against the risk of being underinsured in case of a total loss.
Peace of Mind: Full GAP coverage can provide peace of mind knowing that you won’t be left with a large debt if something happens to the vehicle.
Ultimately, it boils down to your financial situation, your risk tolerance, and how long you plan to keep the vehicle. If you can afford the higher monthly payment and value the extra protection, the full GAP coverage may be worth it. If you’re comfortable with the risk and prefer to save money each month, the partial coverage might be a sensible choice.