WEDNESDAY, JULY 5, 2023
Getting a brand new car is a very exciting time, but you shouldn’t let your joy overshadow the responsibility of holding a hefty loan. There’s a way to be happy and responsible simultaneously. How? Invest in gap insurance.
Did you know that your car will lose about 30 percent of its value within just one year, and about 50 percent of its value by year three? Because cars depreciate so quickly, the actual cash value (sticker price minus depreciation) of your car may be thousands less then what you still owe on your loan, which is referred to as being “upside down” on your loan. 
If your car is totaled before it’s paid off, it could mean a huge loss to you. Let’s run some numbers to see why. Say you buy a new car for $35,000 and at the time of the accident in which your car is totaled you still owe $25,000 on your loan. Because of depreciation, your car’s actual cash value is $20,000. That means that after your $500 deductible, your auto insurer will give you a settlement of $19,500. But since you still owe $25,000 on your loan, you’re left with a gap of $5,500 and no car.
That’s where gap insurance comes in. It covers the difference between what your auto insurer will pay and the balance you still owe. This coverage is optional and can be added to your auto policy at any time, which means you have time to allow your independent insurance agent to offer you quotes, rather than accepting whatever the car dealer offers. You can often purchase this coverage for under $30 per year, a premium that decreases as your car ages.
If you’ve financed your vehicle, own a car make/model with a high depreciation rate and/or put less than 20 percent down, then gap insurance is a good idea to protect the large investment you’ve made in your new car.
Ask us about coverage today. Contact Gordon Insurance for more information on Redwood City auto insurance.
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