Guaranteed Asset Protection (GAP)

Guaranteed asset protection (GAP) is an optional protection that helps protect car owners from financial losses. If a settlement from an insurance company after an accident isn’t enough to pay off the owner’s loan or lease, GAP helps cover the difference. Without it, the owner must pay the difference on their own.

To learn more about how GAP can help protect you against out-of-pocket losses, contact the auto insurance experts at RCU Insurance Services in Santa Rosa, California.

How Does GAP Protection Work?
When you purchase or lease a new vehicle, it begins to lose value the moment you drive it off of the lot. Many vehicles lose 20% of their market value within the first year of ownership.

Auto insurance companies typically pay the current market value of a vehicle if it’s a total loss after a covered claim. Unless you put down at least 20% when you purchase a vehicle, you may be upside down on your loan or lease. This means that you owe more money than your car is worth. As you make regular payments over time, this situation often corrects itself. Eventually, you will owe less on your car than its fair market value.

During the first few years that you own a new vehicle, you may be financially vulnerable to significant out-of-pocket losses if you are in a severe accident.

What Happens If Your New Car Is a Total Loss?
After a covered accident or incident, your insurance company will assess the damage to your vehicle and decide whether to repair it or call it a total loss. If your car is a total loss, the insurance company may provide you with enough money to cover the car’s fair market value. If you have a loan or lease, the insurance company sends the settlement funds directly to the lienholder.

If you owe more on your car than its fair market value, you are legally responsible for paying the difference between the outstanding debt and the insurance company’s settlement. Your lienholder may demand that you pay the debt immediately. GAP is designed to reduce or eliminate the difference between what your insurance company pays you and your outstanding loan balance.

When Do You Need GAP?
Your agent may recommend that you purchase GAP in these situations:

You made a down payment on your vehicle of less than 20%. Unless you made a significant down payment on your new car, you probably owe more than the vehicle’s fair market value. You may make several years’ worth of payments before the amount you owe and your car’s value are in balance.
You rolled the balance from your previous car into your new loan. If you were upside down on your last car or the dealership didn’t give you enough money to pay off your previous loan, your lender may have included the outstanding debt in your new loan. That extra balance could cause financial problems for you if your new car is in an accident.
Your vehicle has poor resale value. How quickly vehicles lose value varies among different makes and models. If your car doesn’t have good resale value, you may be upside down even if you made a significant down payment at the time of purchase.

You put many miles on your car quickly. A vehicle’s mileage significantly impacts the resale value. If you drive more than the average of 12,000 to 14,000 miles per year, you may be upside down on your car, even if your loan included a 20% down payment.
You have a long-term car loan. Auto loans with terms of 60 months or more take longer to reach the break-even point between the amount you owe and your car’s value. You may be upside down on your loan for longer if you choose a loan of more than five years.

GAP Protection Options
Fortunately, the agents at RCU Insurance Services have GAP options to meet your individual needs.

Guaranteed asset protection (GAP) reduces or eliminates the difference between the amount of money you owe your lienholder and your insurance company’s settlement.

GAP plus can help reduce the amount of money you need to borrow to replace your vehicle.
Deductible assistance provides financial help when your car is damaged but isn’t a total loss.

Get the GAP Protection You Need
Contact the GAP experts at RCU Insurance Services today to get the auto coverage you need to help protect your finances.

Your purchase of MEMBER’S CHOICE™ Guaranteed Asset Protection (GAP) is optional and will not affect your application for credit or the terms of any credit agreement you have with us. Certain eligibility requirements, conditions, and exclusions may apply. You will receive the contract before you are required to pay for GAP. You should carefully read the contract for a full explanation of the terms. If you choose GAP, adding the GAP fee to your loan amount will increase the cost of GAP. You may cancel GAP at any time. If you cancel GAP within 90 days you will receive a full refund of any fee paid.

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