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GAP Insurance Question?

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jbear555

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Discussion starter · #1 ·
Hi All,
State Farm is no longer providing GAP ins. and I am happy with them so don't wish to change. Here's the skinny...
Last Thursday we bought an RTL-E at right around 50K OTD after adding a tonneau, ext. warranty, and some other things that we actually wanted. We put down 15K and financed for 60 mos. Is GAP recommended in that scenario and...where do I get it? My agent sent me a number for US Bank (who now owns State Farm)...are they a good source or do you (anyone) have a recommendation?
We aren't picking up the truck until Saturday.
Thanks folks.
 
#2 ·
jbear555 said:
do you (anyone) have a recommendation?
Click to expand...
It is my personal opinion that the need for GAP insurance means you spent more on a vehicle than you should have. :)
 
#3 ·
Based on my understanding of GAP insurance, the finance company you do your car loan through will require it depending on what your actual financed amount vs. what the car will actually be worth when you drive it. Based on what you put down I wouldn't think GAP insurance would be needed unless it is something that you want for peace of mind? Based on zroger's point - if you need GAP insurance, you probably are financing way more than you should and maybe need to look at a more affordable vehicle?

Personally, I will not finance anything more than $25k for a car/truck at 60 mo. If I cannot get the bottom dollar to that amount, I will either save more or look at a different vehicle. Economy is not getting any better, I would advise you to be very cautious and eliminate wanting something vs. a true need that fits within your budget.
 
#7 · (Edited)
State Farm is not owned by US Bank. The two entities entered into an Alliance wherein US Bank has taken over State Farms existing deposit and credit card accounts. State Farm is just getting out of the banking business.

newsroom.statefarm.com

State Farm and U.S. Bank Announce Strategic Alliance

This alliance will bring U.S. Bank products and services to State Farm customers, offering them new, easy ways to manage their banking needs.
newsroom.statefarm.com newsroom.statefarm.com

As for GAP insurance, most financial institutions will require you to carry GAP insurance until such time as the gap between the value of the vehicle and the outstanding amount of the loan is equal. At that point you can drop the GAP insurance. It is how lenders insure that their loan is not defaulted on in the case of a serious accident or a vehicle is totaled.
 
#8 ·
jbear555 said:
Hi All,
State Farm is no longer providing GAP ins. and I am happy with them so don't wish to change. Here's the skinny...
Last Thursday we bought an RTL-E at right around 50K OTD after adding a tonneau, ext. warranty, and some other things that we actually wanted. We put down 15K and financed for 60 mos. Is GAP recommended in that scenario and...where do I get it? My agent sent me a number for US Bank (who now owns State Farm)...are they a good source or do you (anyone) have a recommendation?
We aren't picking up the truck until Saturday.
Thanks folks.
Click to expand...
Are you happy with State Farm because you have not had any claims they refused to pay or are you happy with them because their rates are better than most? I always shop around for insurance coverage every two years. It has saved me a lot of money and headaches.
 
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#10 ·
jbear555 said:
Last Thursday we bought an RTL-E at right around 50K OTD after adding a tonneau, ext. warranty, and some other things that we actually wanted. We put down 15K and financed for 60 mos.
Is GAP recommended in that scenario and...where do I get it?
Click to expand...
Whether or not GAP is recommended is entirely dependent on your financial situation.
Do you have a substantial emergency fund? Is it sufficient to pay off the difference between what is owed and what insurance would cover if it were totaled?

There are a few problems I see with this transaction...
  • You are rolling lots of extra garbage into the loan (tonneau, warranty, "some other things"). You need to pay for all of these extras/accessories separately with cash. If you can't afford to do this, then don't purchase the items. Adding them to the financing immediately puts you upside down on the loan, with thousands in negative equity.
  • You are financing a car for FIVE YEARS. That is a long time to draw out the payment period and a lot of your monthly payment going to interest. I personally wouldn't finance a depreciating asset for more than three years or so. If you can't afford a 36 month payment, then find a cheaper vehicle or put more down.
 
#14 ·
I have always looked at GAP insurance as a bet that pays off well for the house. Put the premium in a savings account along with the money that you would spend on extended warranty etc. Over the years, after many major purchases you will have a pile of money available whenever you get bit by the unlikely events such as a total loss exceeding the insurance payout or a catastrophic failure not covered by the manufactures warranty. Just MHO.
 
#15 ·
Simplest way to know if you need Gap insurance is to just check the KBB value of your vehicle. If it is valued at more than the total loan amount (with some buffer), chances are you dont need it. GAP is just to make sure if you total the vehicle, there is enough insurance to payoff the loan. Its really not that hard to meet that amount, especially in the current used car market.
 
#17 ·
I financed at around $35k for my RTL (~$45k OTD in June 2022). I do not have gap insurance. I just wanted to comment as a data point for OP.
 
#19 ·
jbear555 said:
Hi All,
State Farm is no longer providing GAP ins. and I am happy with them so don't wish to change. Here's the skinny...
Last Thursday we bought an RTL-E at right around 50K OTD after adding a tonneau, ext. warranty, and some other things that we actually wanted. We put down 15K and financed for 60 mos. Is GAP recommended in that scenario and...where do I get it? My agent sent me a number for US Bank (who now owns State Farm)...are they a good source or do you (anyone) have a recommendation?
We aren't picking up the truck until Saturday.
Thanks folks.
Click to expand...
I think gap insurance is when you lease
 
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