Being “upside down” is a condition wherein one owes more money on a piece of property than the property is assumed to be worth! Gap Insurance protects consumers against this unfortunate financial position. We generally use that term, upside down, to refer to car loans.

Picture the purchase of a new car. You have done all the research, and then made a great deal on the car of your dreams.


No matter, a new car generally loses 20% of its value the minute you leave the dealer’s lot. The car is already considered used! Normal collision usually only covers your car up to the book value, which could be 80% of the money you still owe. If your $30,000 new car is totaled or stolen, you may owe $6,000 more than your insurer is willing to pay you!

Of course, the same could be true a few months after the purchase of a used car too. And this vulnerability especially exists if you traded a car in for your purchase, and you were upside down on that loan! You may have rolled part of your old loan into your new one.


Gap Insurance Makes Up The Difference

Auto Gap insurance was developed to solve this problem. Automobile gap insurance is an interesting development in the world of car insurance. This specific type of insurance came into being primarily because of the ever-rising costs of new cars. In the early 1980s, car dealerships began offering “gap” or “guaranteed asset protection” insurance as a way for consumers to ensure that should their car be totaled, they would have a means for covering the difference between the car’s actual worth and what its current “fair market” value might be.

Your car dealer may offer you auto gap insurance. But a car dealership is not always the most economical place to buy car gap insurance. In fact, they may charge $800 for gap coverage, and also suggest that you roll the price into your loan! Now your loan is even larger, with higher payments to make! Of course, the dealership takes a generous commission for this service, on top of what they have earned for their real business – selling cars!

The Best Deal on Car Gap Insurance

You can purchase auto gap insurance directly from insurers for much less, and a quick on line search should help you out! Look for a simple form and a great price that is usually about half of what the car dealer charges. Also, check for third party quality control like the Better Business Bureau On line Reliability Program.