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FEB 22, 2022

Is GAP worth it?

By

Caribou

2 min read

If you’ve ever been offered GAP by a dealership or during a refinance, your first question might be “is it actually worth it?” You’re not alone. Here are the basics about what GAP is and if you should get it.

Driver's seat view on a forest road

What is GAP?

Guaranteed Asset Protection (or GAP) helps to pay off the difference between your car’s loan and its value if your car is lost, totaled, or stolen. This is called a “total loss” situation, and it’s usually determined by your insurance.

Example: Your loan is $20,000. Your collision or comprehensive coverage pays your car’s present value, whatever that is at the moment. Let’s say this is a car you bought for $20,000.

Since your car loses about 15-20% of its value once you drive it off the lot, your car is immediately worth $17,000 or less. Which means that you’ll have to pay $3,000 or more in a total loss situation.

Of course, this number varies based on how many of your payments you’ve made. But your car continues to lose value over time, potentially making the problem worse.

GAP covers that difference between your loan and your value in a loss, so you don’t have to pay for it out of your own pocket.

Should I get GAP?

You might want to get GAP if your loan amount is close to or higher than your car’s value, and you want to be protected in a total loss situation. This is because your car will almost always keep losing value over time, increasing the “gap” between your loan amount and value. 

There are many reasons that your car loses value, including mileage and age. But sometimes cars can lose a lot of value instantly because of events outside of your control. For example, the value of cars decreased in 2020 during the early stages of the COVID pandemic and later increased shortly after in 2021 due to the automotive microchip production shortage. Recalls are a more common example — a car with an open recall can lose value even if you’ve gotten your car repaired.

Of course, if your car’s value is much higher than your loan amount (and you know it will stay that way), then you probably don’t need GAP. If you’ve bought GAP and you no longer need it because you’ve paid your loan down, you do have options. That is, you can typically cancel it. By cancelling, you get a prorated refund — that is, since GAP is paid yearly, you’ll get refunded for any months in the year that you don’t want GAP.

Many car owners have GAP on their loans. You probably already have GAP on your car loan too, and for the same reason: it can be an inexpensive way to get peace of mind, no matter what happens to your car.

With Caribou, you could start saving today!

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NMLS #1746612
1.877.445.0070

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Caribou Insurance Services, LLC
1.877.255.2660
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insurance@gocaribou.com


* Refinance savings may result from a lower interest rate, longer term, or both. There is no guarantee of savings. Your actual savings, if any, may vary based on interest rates, the repayment term, the amount financed, and other factors.

+ To check the refinance rates and terms you qualify for, we conduct a soft credit pull that will not affect your credit score. However, if you choose a loan product and continue your application, we or one of our lending partners will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

++ Social security number is required should you choose to move forward in the loan application process.

** APR is the Annual Percentage Rate. Your actual APR may be different. Your APR is based on multiple factors including your credit profile and the loan to value of the vehicle. Advertised 1.99% APR is based on a representative example of refinancing a 2021 or newer vehicle with mileage of less than 85,000 miles and a FICO score higher than 740. Lowest Rate not available in CA, ME, MD, MS, NE, NV, PA, WV, WI and VT. Not all borrowers will receive the lowest rate. All applications are subject to verification of employment. We do not guarantee that you will receive any loan offers or that your loan application will be approved. If approved, your actual rate will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Insurance savings will not result from lower APR.

Terms and Conditions apply. Caribou reserves the right to modify or discontinue products and benefits at any time without notice. Participating lenders, rates and terms are also subject to change at any time without notice. The information you provide to us is an inquiry to determine whether our lenders can make you a loan offer. If any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. We do not guarantee that you will receive any loan offers or that your loan application will be approved. If approved, your actual rate will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors.

Insurance products offered through Bindable and Caribou Insurance Services, LLC. Caribou is working with Bindable who owns MyLifeProtected and MassDrive Insurance Group, LLC, the licensed agent for all products.


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