GAP Coverage Thru Auto Insurance?

[Jaggrey]

When I financed my car years ago (2013), I remember the dealer pressured me into getting GAP insurance thru them that added maybe $10/month to my payment. I got home and switched my auto insurance to the new car and they said they could add it for something like $2/month, which I did.

Fast forward to today and my friend just financed a new car. Remembering my experience I told him to get it thru the auto insurance, but now every provider he speaks with says they don’t offer it. Has something changed??

 

[Jaggrey]

Sorry I should have mentioned... my friend bought a 2020 Honda Accord. Living in Florida.

 

[MarcinTexas]

If folks bought what they could afford and didn't finance the entire purchase price of the vehicle - they wouldn't need gap insurance. Make decisions with your financial future in mind. Don't finance a car if you can't afford to put a substantial down payment on it. Gap Insurance is a necessary evil for folks that finance more than they should. Another way of looking at it - if your car loan is more than 20% of your gross income - you are financing way too much car. The financial crisis we are in is partly due to the fact that people have too much debt and no meaningful savings (3-6 months of income).

 

[DragonCreek]

If folks bought what they could afford and didn't finance the entire purchase price of the vehicle - they wouldn't need gap insurance. Make decisions with your financial future in mind. Don't finance a car if you can't afford to put a substantial down payment on it. Gap Insurance is a necessary evil for folks that finance more than they should. Another way of looking at it - if your car loan is more than 20% of your gross income - you are financing way too much car. The financial crisis we are in is partly due to the fact that people have too much debt and no meaningful savings (3-6 months of income).

The 'business model' for most of the businesses whining about the current crisis, is to pay last month bills with this months income (restaurants in particular) sounds a lot like the paycheck to paycheck life most people get by with...but those businesses are getting huge bailouts without the criticism for not having 3-6 months of income set aside

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[MarcinTexas]

The 'business model' for most of the businesses whining about the current crisis, is to pay last month bills with this months income (restaurants in particular) sounds a lot like the paycheck to paycheck life most people get by with...but those businesses are getting huge bailouts without the criticism for not having 3-6 months of income set aside

I'm not defending corporate financials - we as consumers have no control over that. We as individuals only have control over ourselves. And relative to most people's income - individuals are getting big money. The stimulus checks coming out this week for low income families equates to a months salary at least...if not more.

My point is that individuals need to own the responsibility for their situation. And frequently - they are in their situation due to over leverage. More leverage relative to income than most businesses. The big difference is that business directly employee people. Households do not.

 

[np86]

If folks bought what they could afford and didn't finance the entire purchase price of the vehicle - they wouldn't need gap insurance. Make decisions with your financial future in mind. Don't finance a car if you can't afford to put a substantial down payment on it. Gap Insurance is a necessary evil for folks that finance more than they should. Another way of looking at it - if your car loan is more than 20% of your gross income - you are financing way too much car. The financial crisis we are in is partly due to the fact that people have too much debt and no meaningful savings (3-6 months of income).

I bought what I could afford AND financed over 90% of the purchase price of the vehicle at 1.9% over 48 months. Why? Because I could make 1.9% with my eyes closed as could most people if they try. Why give $20k liquid right now when you can make it work for you? I don't know anybody that puts a substantial amount down if you can finance it for cheap. Also gap insurance is a few dollars/month.
I believe that if you have to think long and hard if you can afford the car or the payments on the car.. then you probably can't afford it if any shit hits the fan like it is right now.

 

[MarcinTexas]

I bought what I could afford AND financed over 90% of the purchase price of the vehicle at 1.9% over 48 months. Why? Because I could make 1.9% with my eyes closed as could most people if they try. Why give $20k liquid right now when you can make it work for you? I don't know anybody that puts a substantial amount down if you can finance it for cheap. Also gap insurance is a few dollars/month.
I believe that if you have to think long and hard if you can afford the car or the payments on the car.. then you probably can't afford it if any shit hits the fan like it is right now.

If you financed for 48 months - you are in the minority. Congrats. But I have been in the finance industry for 25 years - former national manager of small business lending with Chase and I can assure you - most buyers buy far too much car. Case in point - the average new car price is over $30K - half the median income. As people become less and less content with driving what they can really afford and demand things like leather, heated and cooled seats, SUVs (when they don't need one) they put themselves farther and farther into debt. The average new car loan is over 72 months...on a depreciating asset. Our country is drowning in self induced debt.

 

[Frankie Knuckles]

I bought what I could afford AND financed over 90% of the purchase price of the vehicle at 1.9% over 48 months. Why? Because I could make 1.9% with my eyes closed as could most people if they try. Why give $20k liquid right now when you can make it work for you? I don't know anybody that puts a substantial amount down if you can finance it for cheap. Also gap insurance is a few dollars/month.
I believe that if you have to think long and hard if you can afford the car or the payments on the car.. then you probably can't afford it if any shit hits the fan like it is right now.

You understand how money works. Money is cheap to borrow. Leverage your money and make more in the markets than you pay in finance charge. This generally works well with rates at 3% or lower. Sadly though, most folks usually spend more than they can afford. Nice post sir!

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[Frankie Knuckles]

If you financed for 48 months - you are in the minority. Congrats. But I have been in the finance industry for 25 years - former national manager of small business lending with Chase and I can assure you - most buyers buy far too much car. Case in point - the average new car price is over $30K - half the median income. As people become less and less content with driving what they can really afford and demand things like leather, heated and cooled seats, SUVs (when they don't need one) they put themselves farther and farther into debt. The average new car loan is over 72 months...on a depreciating asset. Our country is drowning in self induced debt.

This post is spot on as well.