For the first few years of an auto loan or lease, you typically owe more money than what the vehicle is actually worth. The reason why you can owe more than the car's actual cash value (ACV) is because of depreciation.
Here's an example. Imagine you purchase a new car for $40,000, and you finance the entire $40,000 purchase with an auto loan. As soon as you leave the car dealership, your car depreciates and is now worth $37,000. Therefore, you owe $3,000 more than the car is worth.
Let's look at another example. Say you purchase a car for $25,000 and take out a $15,000 loan. After two years of ownership, your car gets totaled in an accident. The car's depreciated value plummets to $10,000, and you still owe $12,000 on the car. You would have to pay the $2,000 difference out of pocket, or gap insurance pays it.