If you are in the market for a new car, you may have asked yourself an important question, “ Should I lease or buy a car?” It’s important to consider all your options when you decide to purchase or lease a vehicle. There is a common misconception that car insurance is the only protection you need for your leased or new vehicle.
Have you heard of GAP (Guaranteed Asset Protection) insurance and its benefits? The article can help you learn more about the benefits of gap insurance for leasing vs. buying a car – as well as everything you need to know about gap insurance. This is important and could potentially save you a lot of money in the future.
What is Gap Insurance?
“Gap” is an acronym for “guaranteed auto protection.” When you purchase gap insurance, you are protecting your vehicle while the insurer’s loan is more than the overall value of your car. The insurer under this type of policy would be liable to repay this difference in value should the car get totaled. This is the biggest difference between regular car insurance and gap insurance.
How Does Gap Insurance Work?
Gap insurance exists to protect drivers and cover the difference between what you owe on your car and its actual cash value in case of an accident or theft.
As soon as you purchase a car, its value begins to depreciate, which means that it may be worth less than you owe on it. This is where gap insurance comes in handy. It helps in situations where you owe more on the car than what its market value, an instance when it would be beneficial to refinance a car loan.
However, if your car is totaled or stolen, your insurance company will only pay you the actual cash value of the car, which may be less than what you owe on it. In this case, gap insurance covers the difference between the actual cash value and the outstanding balance on the car loan.
What are the Benefits and Disadvantages of Leasing a Car?
When a buyer chooses to lease a vehicle, there are some disadvantages, but there are also some key benefits to take advantage of. The advantages of leasing a vehicle could include; a lower monthly payment, a newer vehicle, and some dealers could even give you the option to buy the vehicle at the end of the lease.
The disadvantages are things like mile limitations (usually between 10,000 and 15,000 miles per year), no modifications to the vehicle, and if you are involved in an accident and your vehicle is leased, you could be in a lot of debt – unless you have gap insurance to absorb the cost. That’s why it can be so beneficial to have gap insurance! The benefits of gap insurance for leasing vs. buying a car are somewhat the same. Gap insurance can be beneficial if you get into an accident and the car is totaled, or the car is stolen.
How Much Does Gap Insurance Cost?
Gap insurance isn’t incredibly expensive, so it may be worth paying for. You can add gap insurance to your regular comprehensive auto insurance policy for as little as $20 a year ( which is subject to change based on your state of residence and the provider you are working with).
Insurance policies usually determine the price of your monthly payment based on age, driving record, and even the model of the vehicle. Adding gap insurance through an insurance company can sometimes be cheaper than going through other third party companies.
Gap Insurance Can Be Beneficial Whether you are Buying or Leasing a Car
Gap insurance is typically optional insurance coverage, unless it’s required by the terms of your lease or loan agreement. Needless to say, peace of mind is important when buying or leasing a vehicle. The decision of whether you should lease or buy your next car is yours. While your auto insurance rates may be more expensive for a leased vehicle, the lower upfront cost of a car lease may make you a better choice. No matter your choice, make sure it’s the best one for you! The benefits of gap insurance for leasing vs. buying a car are numerous, but the choice to pay for it is completely up to you.