Should I Buy Gap Insurance?
Answer a few honest questions and our Decision Guide will tell you whether gap is worth it, where to actually buy it, and when to skip it entirely.
Published
For most drivers financing a new car with under 20% down or a loan longer than 60 months, yes — gap insurance is cheap protection against a real scenario. The critical catch is *where* you buy it. Dealers typically charge $400-$900 as a one-time fee (often rolled into the loan so you pay interest on it for years), while adding gap to your existing auto insurance policy usually runs $20-$50 a year — a difference of hundreds of dollars over the life of the coverage. The CFPB explicitly warns that gap is almost always optional, you're not required to buy it from the dealer to get a loan, and you can cancel any time. You usually only need it for the first 2-3 years of a loan — the Texas Department of Insurance suggests canceling once you owe less than the car is worth — so gap is a short-term hedge, not a permanent fixture. Skip it entirely if you put 20%+ down, took a short loan, or have the cash to cover the shortfall out of pocket if the car is totaled.
Sources
- What is Guaranteed Asset Protection (GAP) insurance? — Consumer Financial Protection Bureau
- Am I required to purchase GAP insurance from a lender or dealer to get an auto loan? — Consumer Financial Protection Bureau
- Do you need gap insurance for your car? How does it work? — Texas Department of Insurance
- What Is Gap Insurance and How Does It Work? — Progressive