Auto Gap Insurance in Grande Prairie, AB
Financing is the most popular option when buying a vehicle, even though there are varying levels of each person's finances. Depending on how much you finance on a vehicle, it is often good to consider Auto Gap insurance for added coverage for you and your financial health. At Sprint Auto in Grand Prairie, Alberta, we want you informed about your options.
What You Need to Know
Auto Gap insurance covers the difference between what you owe on a vehicle and its actual cash value in the event of an accident where the vehicle is declared a total loss. It is most commonly offered for brand new cars but can sometimes be a good option for high-value cars less than three years old. This is often an inexpensive add-on to the price of your vehicle upon purchase. We can connect you to our Finance Centre to help you make the right choices for your budget.
How It Works
After buying a car, the value is known to depreciate within the first few months to years of ownership. The price of buying a car also tends to be a little bit higher than the actual value of the car due to additional costs like taxes, registration, and any other fees or added packages. Therefore, you may owe more on the vehicle after buying a vehicle than what it is worth, creating a gap. The gap size also depends on the size of the down payment placed at the time of purchase.
For example, if you finance a car for $23,000 after fees and down payment, and the vehicle depreciates to $20,000, then there is a $3,000 difference between the value of the vehicle and what you still owe on loan. In the event of an accident where the vehicle is declared a total loss, gap insurance covers the difference, so you are not liable for paying the amount.
Is It Right for You?
There are several factors to consider when deciding whether you need extra coverage, like your loan amount. Your loan should be a leading factor in your decision. For example, if you take out a long-term loan, it will take longer to reach a point where the loan amount is equal to the value of the vehicle. Similarly, loans with higher interest rates will also take longer to pay down and reach an equal amount.
Be aware if you make a low down payment on a car. This means you will finance a more considerable amount, which will create a wider gap between your loan amount and the car value.
Also, be mindful if you plan on trading in a vehicle that is not fully paid off and not yet valued more than the loan amount. Then, if you plan to add that remaining balance to your new loan, you will have a larger loan, and again, a wider gap. Finally, consider what model of vehicle you are buying, as certain vehicles, like luxury cars, tend to depreciate more quickly. Cars that depreciate quicker are more likely to create and maintain a larger gap. At the same time, if you typically drive a lot and stack a lot of mileage on your car, the value will depreciate faster, and insurance would be a good idea.
If any of these situations apply to you, it's a good idea to make sure you are covered. Contact our team at Sprint Auto, here in Grande Prairie, Alberta, will help you consider your options and decide what is right for you.
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