Hello everyone, I'm Lauren Sally Zander, your automotive insider. And today I want to talk about Gap. Now, I'm not referring to the space between Michael Strahan's teeth. Gap or guaranteed asset protection is an insurance policy that covers the difference or the gap between what you owe back to a lender and what your insurance company will settle for in the event your vehicle is declared a total loss. Now, you're probably thinking to yourself, I have full coverage insurance. Why would I need Gap insurance? Most consumers are unaware that your insurance company is not required to pay off the balance you owe to a lender. They are merely required to pay the lowest actual cash value that they can find based upon a number of different variables and book values for the vehicle. Now, you ever thought you'd been a lowballed on your trade at a dealership or had negative equity? Imagine haggling with your insurance company who are desperately trying to pay you as little as possible for your wrecked pile of metal. Now, let's talk about how Gap insurance actually works. You've financed the vehicle and your balance is $25,000. Now, somewhere into the loan of that vehicle, you wreck your car and your insurance company totals it, but they say it's only worth $20,000. But wait a second, you still owe $23,000 to the lender. That's a gap of almost $3,000. Plus, any deductibles you owe back to your insurance company. Without Gap insurance, that's your responsibility. With Gap insurance, you walk away, clean and free. Now, not every individual needs Gap insurance for every vehicle that they finance. However, there are a few situations or scenarios that can increase the need for Gap insurance. And let's take a look at some of those examples. The first situation that can affect the need for Gap is negative equity. Now, rolling a balance from a previous vehicle or trade-in can greatly increase the need for Gap. Understand, your insurance company is only interested in the actual cash value of the current vehicle you're driving. The more money you roll over from another vehicle, the greater the need for Gap insurance. The second situation that can affect the need for Gap is your APR. Now, while lower APRs offer a decrease need for Gap, understand that higher APRs offer a significantly increased need for Gap insurance. The reason being that with high APRs, more and more money each month is going towards the finance charges, meaning less and less money each month is going towards the principal balance. If you total the vehicle, chances are you're going to owe more money on it than it's worth. Another situation that can affect the need for Gap insurance is bunny down. Now, if you're putting $10,000 down on a $20,000 vehicle, chances are you don't need Gap insurance. However, if you're placing $0 down or very little money down, say just enough to cover your taxes or your fees, then you're at an increased need for Gap because you are financing the full value of the vehicle. A vehicle that's going to depreciate the minute you drive it off the lot. Meaning, if you total that vehicle, chances are you're going to owe more money on it than it's worth. Now, the fourth and final situation that can affect the need for Gap insurance is your contract term. Now, while shorter terms or short term financing offer a lower need for Gap understand that long term financing or extended term financing offers a highly increased need for Gap insurance. Now, while longer terms offer lower monthly payments, that just means that less and less money each month is going to decrease the principal balance of the vehicle. Meaning, if you total it, chances are you're going to owe more money than the vehicle is worth. I'm Lawrence Alexander, your automotive insider. Hopefully the situations we've went over today provide you enough information to make an educated decision about your need for Gap insurance on your next vehicle purchase. you