When you're financing a used Honda, GAP insurance is one of the protection options you’ll want to weigh during the paperwork. It sounds important, and in many situations, it is. But is it right for you, and how long do you need it for? Honda Van Nuys can explain.
What GAP Insurance Actually Does
GAP stands for Guaranteed Asset Protection. If your vehicle is totaled or stolen, your regular auto insurance pays out the car's current market value. But if you owe more on your loan than the car is worth at that point, you're responsible for the difference. GAP insurance covers that shortfall, so you're not stuck making payments on a vehicle you no longer have.
When It Makes Sense on a Used Honda
A used Honda typically depreciates more slowly than a new vehicle, which means the gap between your loan balance and the car's value tends to be smaller. But there are situations where GAP coverage is still a smart call. If you financed with little or no down payment, rolled in negative equity from a previous loan, or chose a longer loan term, your balance may stay above the car's value for some time. In those cases, GAP insurance is worth considering for the added protection. Remember that some lenders will also require it, so check your loan terms.
When You Can Probably Skip It
If you made a sizable down payment or your loan term is short, you may decide you only need GAP insurance briefly, or not at all. This is often true if you've been making payments for a while and your balance is already close to or below the car's market value. If you feel you’ve hit a point of diminishing returns, you can always discontinue your GAP insurance.
Know Before You Sign at Honda Van Nuys
The finance team at Honda Van Nuys can walk you through whether GAP insurance fits your situation when you're shopping for a used Honda. It's a quick conversation that could save you money and protect you from an unexpected cost. Visit today to drive informed!
