Should I Have Gap Insurance?

[esdrs7]

I typically lease my cars and gap insurance is automatically included in the lease as required by the vehicle manufacturer. I recently purchased a used 2021 Audi RS7. I purchased a gap insurance policy through the selling dealership (it wasn’t an Audi dealership), but recently received a letter in the mail stating that the gap insurance company essentially cancelled the policy and won’t provide coverage because they won’t insure a vehicle that costs so much (over $100,000). I’ll be getting a refund for the amount I paid for the policy, but it all means that right now I don’t have gap insurance. My vehicle insurance carrier does not offer gap insurance, so if I want a gap insurance policy, I have to go out and find one on my own with a different insurance company. So, my question is: should I get gap insurance? The RS7 holds its value quite well and I put a $16,000 down payment on the purchase. I know it’s a risk I take by not having gap insurance, but I wanted anyone’s thoughts on the matter. I’d save a secondary monthly insurance payment if I don’t have it.

[goblues38]

Depends on how much the gap insurance costs. With $16k in equity, you have a good start. Personally, I never get gap insurance as I usually tend to have more then enough equity in the car vs the loan.

[RMode]

Depends on how much the gap insurance costs. With $16k in equity, you have a good start. Personally, I never get gap insurance as I usually tend to have more then enough equity in the car vs the loan.

I’d argue $16k is not a good start on a $115k ish car.

Remember, you’re not buying insurance for today, you’re buying it for tomorrow. Meaning, don’t look at todays value. You don’t have a crystal ball. You also
don’t know what will happen. Most other drivers out there, who your car may interact with, will NOT have coverage sufficient to make you whole. Which means you need to. Not only that, but neither your insurance company, nor someone who may hit you, cares what you owe your bank. That’s between you and them. Insurance is only going to pay what it’s proven to be worth. Sometimes that works out, but when it doesn’t? The bank wants the money from their borrower.

GAP from your current insurance broker should be significantly cheaper than via this “dealer”. It’s well worth it. Making a lump sum or monthly payment on a car that no longer exists isn’t fun.


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[FBAnder]

I always thought this was pretty straight forward. If the amount of the loan could/does exceed the value of the car, get gap insurance. As mentioned, paying off something that you no longer own/exists is an epic fail. This usually seems to be more of a consideration when folks try to put down as little as possible...which DOES seem to be the case here.

[Smookes]

16k down payment on a 6 figure car makes me think you can barely afford this car.

I recently purchased a 2022 A7 with 60% down payment and I declined the gap insurance. If something extreme were to happen, I can easily cover the cost and pay off the remaining balance.

So, the question to you is. Could you cover the cost of your car if something did go wrong? If Yes, then you don't need gap insurance. If not, then grab the gap insurance.

From my point of view, with only 16k paid off and you still have over 90k+ left, grab the gap.

[RMode]

16k down payment on a 6 figure car makes me think you can barely afford this car.

I recently purchased a 2022 A7 with 60% down payment and I declined the gap insurance. If something extreme were to happen, I can easily cover the cost and pay off the remaining balance.

So, the question to you is. Could you cover the cost of your car if something did go wrong? If Yes, then you don't need gap insurance. If not, then grab the gap insurance.

From my point of view, with only 16k paid off and you still have over 90k+ left, grab the gap.

Downpayment and purchase price aren’t necessarily correlated

I’ve purchased cars at this price point, sometimes a bit more, with nothing down. Depends on the cost of the moment, and the upside the cash in my hand can have. I got my S4 (19) new. Nothing down. Could have easily written a check. There was my employee discount + additional incentive from Audi to finance + rate wasn’t expensive. I used the cash for some trading, took my gains, got the incentive, paid it in 6 equal payments. Came out thousands ahead even after cap gains.

At 60% down, they can’t even write you a GAP policy - it would be cancelled and refunded upon submission.

It’s also got little to do with affording the shortfall. The cost of GAP, amortized in months/date of incident (which is the unknown), vs the shortfall amount, vs what will I pay a month above my minimum monthly payment, becomes the big factor. There’s lots of missing info.

But assuming he will pay the standard monthly payment and nothing more, and take the loan to term, gap makes sense. If he’s going to make payments sufficient to retire the loan in 24-36 months, that’s a good case to skip it, for example.


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[AndewBear]

I totally get why you're thinking about gap insurance. It can be a lifesaver if you end up in a situation where your car's value is less than what you owe on it. Picture this: you get into an accident, and your car's totalled. Your regular insurance covers the car's current market value, but what if that's not enough to pay off your loan? That's where gap insurance kicks in, covering the difference. Super handy, right?

But, don't just jump in without checking around. Start comparing different options and prices. Some dealerships might offer it, but sometimes you can find better deals through your own insurance company or other providers. It's worth the time to shop around a bit. In the end, gap insurance can give you peace of mind, knowing you're covered if something unexpected happens. Definitely worth considering if you're financing a car.