Losing your prized, new vehicle to a car accident or theft is never expected and always comes with the additional hassle of dealing with insurance. Insurance companies typically only cover a portion of the costs, adding financial stress to an already stressful situation.
Guaranteed asset protection (GAP) Waiver is an optional product that financially protects the consumer by waiving all or part of the debt owed when a financed vehicle is deemed a total loss or unrecovered theft. This is also known as a debt cancellation agreement and is a valuable tool for anyone purchasing or considering a new vehicle. Data from the University of Michigan Survey Research Center shows that nearly 39% of financed vehicles are protected with GAP Waivers. More than 90% of those purchasers were very satisfied with the purchase, would purchase again, and would recommend a GAP Waiver to others.
With around 40% of households in America saying an unforeseen expense of $400 would be a financial challenge, families must protect their purchases and mitigate their financial risk before it is too late. Standard auto insurance policies generally only cover the current value of a stolen or damaged vehicle, which is often lower than the remaining balance owed on the lease or loan with the difference, or “gap,” not covered by insurance. Thus, the loan’s remaining balance becomes the borrower’s obligation and can cause financial hardship.
For example, say you bought a new truck, financed it for $40,000, and a few months later, the vehicle was stolen from your driveway and found totaled. Your auto insurance company would only pay the truck’s actual value at $33,000, leaving you responsible for $7,000. However, the remaining cost would be significantly reduced or waived with the help of a GAP Waiver.
New car prices have skyrocketed over the last year. According to reports released by Kelly Blue Book, the average price paid for a new vehicle in the U.S. in May was $47,148. This is the second-highest on record, behind only December 2021 when average transaction prices reached $47,202. When purchasing your next motor vehicle, keep in mind that GAP coverage is a necessity to protect you from life's unpredictable hardships, and provides invaluable peace of mind. You can buy a GAP Waiver at the dealership or your financial institution when you buy or lease the car.