When you’re financing a used car, GAP insurance is often part of the discussion. Whether it makes sense for you will depend on a few specific factors. For anyone browsing Plaza used cars across our St. Louis metro locations, here's what you need to know to help you make an educated choice.
What GAP Insurance Does
GAP stands for Guaranteed Asset Protection. When a financed vehicle is totaled or stolen, standard insurance only pays the car's actual cash value at the time of loss. If you owe more on your loan than the car is worth, you're responsible for the difference. GAP insurance bridges the gap.
Why It Matters Less for Most Used Vehicles
New cars lose roughly 20% of their value in the first year. Used cars depreciate more slowly at 10% to 15% annually, and because they've already absorbed that initial drop, the loan-to-value ratio is typically more favorable. If you made a reasonable down payment and financed at market value, you may already have equity rather than a gap.
When It Does Make Sense
There are situations where GAP coverage makes sense on a pre-owned purchase. If you financed the full purchase price with little or no down payment, if you're carrying a loan of 60 months or longer, or if the vehicle is a luxury model that depreciates faster than average, the math often works in your favor. Other scenarios include rolling negative equity from a trade-in into a new loan or instances where a lender stipulates GAP coverage as part of the loan terms.
Ask at Our Plaza Motors Finance Center
The finance teams at our Plaza Motors dealerships can walk you through your loan-to-value position and help you decide if GAP makes sense. The right answer depends on your down payment, loan term, and the vehicle you're choosing. Stop in or reach out online to any of our St. Louis metro locations.