Is dealer GAP coverage worth it?
GAP covers the gap between what insurance pays and what you still owe if the car is totaled or stolen. It matters most with a small down payment, a long loan or negative equity. It is optional, and you can often get it from your insurer or credit union. Compare before you say yes.
What GAP does
If your car is totaled or stolen, your auto insurer typically pays its actual cash value. If you owe more than that on the loan, GAP (guaranteed asset protection) covers some or all of the difference, depending on the contract.
When it can make sense
- You are putting little or no money down.
- The loan term is long, such as 72 or 84 months.
- You are rolling negative equity from a trade into the new loan.
If you are putting a large amount down or paying cash, you may not need it at all.
Questions to ask before you buy
- What is the price, and is it being added to my loan (where I pay interest on it)?
- What is the coverage limit, and does it cover my deductible?
- If I pay off or refinance early, how do I cancel and what refund do I get?
Shop it like any other product
Many auto insurers and credit unions sell GAP coverage, and their price can be far lower than the finance office's. You are not required to buy GAP to get a loan from the dealer. If anyone says it's required, ask them to show you the lender's written requirement.
Our Finance Review checks the GAP price, the coverage and every other product on the menu.
This guide is general consumer information, not legal or financial advice. Rules vary by state and change over time; check the sources below and your own documents.