You probably think that because you have taken comprehensive Auto insurance coverage on your new Automobile that you are well protected, even if your Car is stolen and not recovered, or totalled in an accident. The sad fact is that you are not.
More people are buying brand new vehicles than ever beFore. This is despite the fact that it is now common knowledge that your shiny new Automobile will depreciate in value by at least 20% as soon as you drive your new vehicle away from the dealership. If you put a down-payment of less than 20% on the vehicle, then you have just acquired yourself an asset that is worth less than the outstanding loan on the vehicle.
UnFortunately, this is just the beginning of your trouble. As your Automobile starts to depreciate even further with use, the front-end loaded interest and charges on your Auto loan has the effect of widening the gulf between the market value of your Automobile, and the finance charges outstanding on the vehicle, even further.
Let's have a look at some figures to illustrate this point even further. Imagine you have just bought a new Automobile For $25,000 with a 10% down-payment of $2,500. As soon as you drive away from the dealership, the market value of your new vehicle will drop to around $20,000, but your Auto loan will have an outstanding balance of at least $22,500, leaving you in deficit by $2,500 on Day 1. Even more worrying is the fact that the market value of your Auto will continue to fall as you use it at a greater rate than the outstanding balance owed on your Auto loan.
Here lies your major problem. If your Automobile is stolen and not recovered, or totalled due to an accident or fire, you may get a nasty shock at the value placed on your vehicle by the Auto insurance company. This is because the Auto insurance company will use the market value of your vehicle in their assessment. They are not concerned about how much you may still owe on the vehicle. Now you already know that the market value will be much less than the amount you still owe the loan company.
This could leave you in a financial crisis, as you will be personally responsible For making up the shortfall. Imagine having to Fork out For a loan on an Automobile that you no longer have or can no longer use. This issue if not resolved could also adversely affect your credit history leading to even further financial problems in the future.
This is where Auto GAP insurance comes in. Previously known as Guaranteed Asset Protection, it protects your financial risk of a theft or total loss of your new Automobile, and provides you with financial assistance to address the issue of the negative equity on your vehicle. (Negative equity exists when the value of an asset is worth less than the value of any outstanding finance on that asset.)
Should your Automobile be stolen or suffer a total loss, GAP insurance acts as a stop loss, giving yo the extra payment on top of your Auto insurance payout, so that you have sufficient funds to pay off any existing finance still outstanding on your vehicle.
The great news is that GAP insurance is relatively inexpensive. For the relatively small cost of GAP insurance, it can remove a major financial problem from your life. The huge difference between outstanding finance and the market value of Automobiles is helping to raise the profile of GAP insurance to new heights.
If you are curious about Auto Gap Insurance visit our Auto insurance site where you can get an instant online Auto insurance quote.
Source: www.articlesbase.com
