Guaranteed Auto Protection (GAP) is a Loan Deficiency Waiver designed to eliminate your unpaid net loan balance in the event your vehicle is stolen or damaged beyond repair (totaled). The GAP waiver fills the financial GAP that may exist between the market value of your vehicle and the amount you still owe on it.
Any vehicle, whether new or used, begins to depreciate the moment you drive it off the dealership lot. In addition:
- Over 8 million vehicles are declared a total loss every year in the U.S.
- One of every three Americans will experience a total loss on a vehicle.
This is why GAP is so important.
For example, say the worst happens and you are involved in an accident only one year after purchasing your vehicle. The insurance company declares it a total loss and reimburses you $11,000, which is the current fair market value of a one-year-old vehicle of this make and model. However, you still owe $15,000 on the vehicle-- leaving a "GAP" of $4,000!
The GAP waiver solves this problem. It covers the difference between the actual cash value of the vehicle (primary insurance company settlement) plus up to $1,000 of your deductible and the outstanding loan balance at the time of the loss, less certain deductions.
No one expects his or her vehicle to be stolen or totaled. However, GAP is a practical way to prepare for the unexpected.
(The GAP waiver does not cover every vehicle-related expense. Contact the loan department for a complete description of the GAP policy.)