1. What is Gap Insurance?

Gap insurance covers the difference between what you owe on your auto loan and the car's actual cash value if it's totaled or stolen. This protects you from owing money on a vehicle you can no longer use.

2. How Does the Calculator Work?

The calculator uses the simple formula:

Where:

• \( Loan\ Balance \) — Remaining amount owed on your auto loan
• \( Vehicle\ Value \) — Current market value of your vehicle

Explanation: If the result is positive, that's the amount gap insurance would cover. If negative, you don't need gap insurance.

3. Importance of Gap Insurance

Details: New cars depreciate quickly, often leaving owners "upside down" on their loans. Gap insurance prevents financial loss in case of total loss accidents early in the loan term.

4. Using the Calculator

Tips: Enter your current loan balance and the vehicle's current market value (check sources like Kelley Blue Book). Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Who needs gap insurance?
A: Anyone who owes more on their car loan than the vehicle's current value, especially those with low down payments or long loan terms.

Q2: When is gap insurance most valuable?
A: Typically in the first 2-3 years of a new car loan when depreciation is steepest.

Q3: Where can I get gap insurance?
A: From your auto insurer, dealership (often more expensive), or some lenders offer it.

Q4: Does gap insurance cover my deductible?
A: Standard gap insurance doesn't, but some policies offer "gap plus" that includes deductible coverage.

Q5: Is gap insurance worth it for used cars?
A: Generally less needed unless you have an unusually long loan term or rolled over negative equity.