Imagine the following scenario:
You are spending a Saturday afternoon looking for a vehicle to purchase or lease. You drive to the dealership, find the car you want, negotiate price, make a down-payment, and sign some paperwork. Those keys are yours now. You drive the car off the lot and rear-end someone on the way home. Your newly leased car is totaled.
You were offered ‘gap coverage’ by the dealership before signing the lease. You said no simply because you didn’t want to spend the time understanding the coverage. There was just too much anticipation to drive your new vehicle off the lot.
Gap coverage can help pay the difference between what you owe on the lease and what the insurance company will pay out if they deem the vehicle a total loss. Without proper coverage, this gap between what you’ve paid and what you owe can be significant.
Let’s put this in monetary figures now:
You put $2,000 down on a $20,000 vehicle and haven’t even made your first month’s payment. You total that $20,000 vehicle. Your insurance company pays out what they decide to be the ‘actual cash value’ of the vehicle. This value is equal to replacement cost minus depreciation. Your insurance company may only pay out $15,000, which would mean you still owe $3,000 out-of-pocket.
Gap coverage is a very important coverage to have when leasing or loaning a vehicle. It could take care of that out-of-pocket expense and costs only a few bucks through most insurance companies.