When people make the decision to purchase a new car, it is usually because they’re entered the realm where the current vehicle is beginning to cost them more money than it’s worth. Due to the fact that cars are something we use every day, and most of us take them for granted, we don’t always note the importance of purchasing a new vehicle. However, after the purchase of a house, a car is the most financial decision someone can make for themselves. For this reason, we should consider paying a little bit more attention to the deal and not let our excitement cloud our judgment.
It’s overwhelming when you’re in the final stages of your purchase, as you’ve already been put in front of several different people. They’re all throwing numbers out, and you’re a little bit confused, but don’t want to admit that to anyone. Then you sit down to sign the paperwork, and at this point, some car buyers aren’t even entirely sure what they’re signing. During the final process is when some of the most important information is offered up and presented as options for the buyers. This is the point at which you’re going to want to perk up your ears, and actually listen.
Add-On Options for Financing
When you’re discussing your financing options with the finance director, he or she will begin offering you additional services, such as GAP, VSC, and a bunch of other letters. It’s not uncommon for a lot of people to say no to these add-ons, but some of them are very much worth the extra cost. One the options you’re given by the finance person is something called GAP Insurance. The trickier F&I people are going to try to slip it into the contract and pretend that it’s not optional, but the honest ones will break it down for you.
If they explain it and you’re still a little bit confused or your stress level is off the charts from being bombarded by salespeople, here it is in simple terms. You finance a brand new car, and the amount of your loan is $22,000 and some change. Let’s say two years after you bought it, you total it. The insurance company will factor in depreciation, and they’ll look for reasons not to pay the full amount that you still owe on the car. So let’s say you still owe $12,500 on your car, and the insurance company has agreed to pay you nine thousand dollars to replace it. Guess what happens to the other thirty-five hundred dollars?
If you decline GAP insurance coverage, YOU happen to that $3500. You still have to pay that money off, even though you don’t have a car, and any money you had into the car is gone. A finance company is not just going to forgive the remainder of the loan out of the goodness of their hearts. They want their money. The debt doesn’t disappear, and if you want to talk about hard feelings, try paying for a car you no longer own. There is no greater knife in the heart than that.
How GAP Coverage Can Save You
However, if you decided to pay attention to the F&I person when you bought your car and you listened to their explanation of GAP insurance, chances are that you’re in pretty good shape. If you elected to take the GAP coverage, you’re completely covered for the gap between what insurance was willing to pay versus what you owe on the vehicle. That’s right, for an additional $900-1000 spread out over the life of the loan, you’re protecting yourself. It’s going to be hard enough to get back on your feet after an accident that totals your car, why make it more difficult than it has to be?
So the next time you buy a new car and decide to tune out what the money person is saying, don’t. They’re offering you services that may save your credit, and your peace of mind. Isn’t a couple of dollars added to your monthly payment worth writing a check every month for something intangible? Nothing hurts worse than paying for something you can drive anymore. So pay attention, and take the GAP coverage.