Can I skip out on GAP insurance?

Philipgonzales3 · August 10, 2020

2 hours ago, steve841 said:

Check out Progressive for your insurance.

They offer a "Loan Payoff" option for $5 per 6 months.

I jumped on it.

Funny you say that. I just downloaded this insurance quote comparison app called Jerry. Shows progressive being $30 a month cheaper for me with loan payoff insurance (everything else equal). I'd lose out on the mechanical breakdown insurance but I think it may be worth it. Going to look more into it.

steve841 · August 10, 2020

No one has come close to Progressive for me ... and I check every 6 months.

Mikedfw · August 10, 2020

Less than 5% of all new vehicles are totaled within the first year. First year depreciation averaged 20% in that same year. Vehicles are totaled when damage exceeds 65-70% of it's ACV or actual cash value.

90% of all motorcycle fatalities happen in the first year on the road. I've been riding since I was 8 years old so I will gamble.

If you can't afford to burn in your barbeque 20% of the MSRP you can't afford a new truck. IMHO. People burn money in a hundred different ways. Gambling is a huge one. Lotto tickets? Many have some slack in the budget, the question is how much. For me that number has been near zero most of my life so only two new vehicles with four wheels ever in nearly seven decades.

Trucks I looked at were around $75 K the first time we looked. I took 20% of that and bought a two year old loaded LaCrosse cash that had under 35K miles on it and remained patient. Second time I looked I found Pepper. A 30 K truck a year old with a thousand miles on her 'mint' for under $19 K and got more for my trade than I paid for it. IOW I bought a new truck with a full warranty for less than auction price and made enough cash on the deal to pay the first toys for her.

Yea, yea, I know....but I REALLY want this......and I can't afford it. Then Gap it.

It basically comes down to depreciation. There is nothing wrong with financing something to get what you really want as long as you are able to make the payments without hurting other aspects of your life, and the reality now is that most people are going to finance for longer terms to get what they want.

The problem is that vehicles have some of the worst depreciation of just about anything, so while you may be able to afford the payments, if something happens to the vehicle, you're stuck with a huge chunk of money you have to pay off or roll over into another loan, which means that your replacement vehicle will most likely have to be significantly less expensive to make up for the difference, so if you can have gap insurance that will prevent that from happening for a relatively small price, there is really no reason not to do it.

Yes statistically you are unlikely to total your vehicle, but it's much better to have it and not need it than need it and not have it.

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Grumpy Bear · August 10, 2020

6 hours ago, Mikedfw said:

it's much better to have it and not need it than need it and not have it.

That is the platitude isn't it?

Grumpy Bear · August 10, 2020

6 hours ago, Mikedfw said:

It basically comes down to depreciation. There is nothing wrong with financing something to get what you really want as long as you are able to make the payments without hurting other aspects of your life, and the reality now is that most people are going to finance for longer terms to get what they want.

Let's agree to disagree on this one. I went to a different school. I finance what i NEED and then only if it makes really good sense and I can afford to loose it if I loose my job or means to pay it off. A calculated risk if you will. I took a 30 year note bo buy a home but paid it off in 7 years forgoing what I REALLY WANTED. Saved a quarter million doing it to so now I have more money....

What I REALLY WANT I have to be able to afford to pay cash for. And if I have that much cash and someone else needs it worse than I (family) then that is first. WANTS are dead last on my list of things to spend money and time on.

It's just a different way of doing it. Others will disagree and I am not the master of their life am I? So have at!!

yousaveone · August 11, 2020

What happens if you get into an wreck? Take the GAP.

I financed through GM to get the deals and the immediately refinanced through my credit union. Gap was $300 for the term vs GMs 900$. The dealer I bought it from wasn't happy but screw them.

Philipgonzales3 · August 11, 2020

10 minutes ago, yousaveone said:

What happens if you get into an wreck? Take the GAP.

I financed through GM to get the deals and the immediately refinanced through my credit union. Gap was $300 for the term vs GMs 900$. The dealer I bought it from wasn't happy but screw them.

Well if you aren't upside down or not too much upside down it won't be so bad. I think I'm just going to send it! Lol

gregus73 · August 11, 2020

I got it through Esurance.
The finance guy did try to sell it to me through GM.

It paid off one time to me about 13 years ago when my Mustang GT was totaled out.

Mikedfw · August 12, 2020

Let's agree to disagree on this one. I went to a different school. I finance what i NEED and then only if it makes really good sense and I can afford to loose it if I loose my job or means to pay it off. A calculated risk if you will. I took a 30 year note bo buy a home but paid it off in 7 years forgoing what I REALLY WANTED. Saved a quarter million doing it to so now I have more money....

What I REALLY WANT I have to be able to afford to pay cash for. And if I have that much cash and someone else needs it worse than I (family) then that is first. WANTS are dead last on my list of things to spend money and time on.

It's just a different way of doing it. Others will disagree and I am not the master of their life am I? So have at!! [emoji4]

I'm not going to disagree. Doing it that way is definitely the smartest way for most people and I commend you for being able to stick to doing that. Most people, myself included just won't do it, even if it is the smarter thing to do. I think having the gap insurance is the smart thing to do for those that are unwilling to buy what they can pay cash for or pay off quickly.

I also am biased towards getting it largely because I worked in insurance and saw how screwed a lot of people were without it. The odds are you'll never need it, but its relatively inexpensive and worth it, to me at least.

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Grumpy Bear · August 12, 2020

14 minutes ago, Mikedfw said:

I'm not going to disagree. Doing it that way is definitely the smartest way for most people and I commend you for being able to stick to doing that. Most people, myself included just won't do it, even if it is the smarter thing to do. I think having the gap insurance is the smart thing to do for those that are unwilling to buy what they can pay cash for or pay off quickly.

I also am biased towards getting it largely because I worked in insurance and saw how screwed a lot of people were without it. The odds are you'll never need it, but its relatively inexpensive and worth it, to me at least.

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Are there not some policies that are full replacement policies for like the first year? Somebody has been advertising that of late on TV.

2020AT4 · August 12, 2020

Yes. You do NOT have to get GAP insurance, unless you have some funky state law that requires it. GAP is a waste of money, that's what full coverage insurance is for. If you finance a vehicle, the lender is going to require that you have full coverage insurance anyways.

winks79 · August 12, 2020

If you are having to finance a vehicle 6 or 7 years to own it, and only paying down 5 or 10 percent, you are on the edge of being under if something were to happen. Trucks do hold their value better, but not enough to cover that amount. I'll give an example. My last truck I had was a 2018 GMC SIerra Premium Plus. When I sold it last year it had 18k miles on it. Still looked brand new. Sticker was almost 57k new. I bought the truck for 43k plus tax. So had around 44k in it out the door. I did not finance, paid cash for it. Sold the truck a year later, got 40k for it myself. If I had traded for my new 19' they were only gonna give me 38k for it. The bank said it was worth 41-42k. So I still lost money even with the higher amount the bank said it was worth.

New vehicles are a money pit if you are not going to keep them long, and especially with the 6 plus year financing that most people do to be able to own one. I say most people need the GAP.

I on the other hand will never finance another vehicle. The last vehicle i financed was an 08' Z71 Avanlanche, best vehicle I ever owned. Bought new, paid it off in 3 years, kept it 10 years. After I paid it off, I continued to pay myself the same $700/month I was paying for the truck because I was so use to having a payment that I was not missing that money. So when it was time to purchase a new vehicle. the 18' GMC , I had 60k saved up and paid cash. and still had money left over. Sold the 18' for 40k, was able to get a great deal on the 19' last year, got it for the same price I paid for the 18', so it cost me about 4k more to get in the new truck. I paid cash for it also, and am still paying myself the $700/month payment and will never finance another vehicle. So I currently have a new truck paid for, with another 30k on the side still building every month I pay myself.

If you can discipline yourself, anyone can do it. I know most people can't or don't pay down a lot on a vehicle, but if you can ever get ahead you can stay ahead if you put your mind to it. I just said one day that it was not worth paying other people interest, so I found a way around it. It really is easy, the hardest part is starting.

winks79 · August 12, 2020

6 minutes ago, 2020AT4 said:

Yes. You do NOT have to get GAP insurance, unless you have some funky state law that requires it. GAP is a waste of money, that's what full coverage insurance is for. If you finance a vehicle, the lender is going to require that you have full coverage insurance anyways.

Full coverage insurance will not cover you being upside down in a loan. It will pay what the car is worth, not what you owe on it.

2020AT4 · August 12, 2020

2 hours ago, winks79 said:

Full coverage insurance will not cover you being upside down in a loan. It will pay what the car is worth, not what you owe on it.

Yep, but how often do you total a new vehicle? GAP only pays if it gets totaled.

Mikedfw · August 12, 2020

Are there not some policies that are full replacement policies for like the first year? Somebody has been advertising that of late on TV.

Some insurance companies offer that for an increase on your premium. For that or gap, you end up having to pay for it one way or another.

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