Can you put gap insurance on a used car?

You should get gap insurance on a used car if you owe more on your loan or lease than the used vehicle is worth. For example, if you have a long-term loan/lease or you made a down payment that was significantly less than the car’s actual cash value, gap insurance may be a good idea.... read full answer

You Should Get Gap Insurance on a Used Car When:

• You do not have enough savings to pay off your loan or lease if the car is stolen or totaled.
• You made a small down payment.
• You have a long-term loan of four years or more.
• You are a single-car household and rely on the vehicle heavily.
• Your loan includes negative equity from a previous vehicle loan.
• You drive more miles than average, which can reduce the vehicle’s value faster.

Gap insurance for a used car can be harder to find since most gap coverage providers will only insure the original owner or leaseholder of the vehicle. Some insurance companies offer loan/lease payoff coverage as an alternative to gap insurance. Loan/lease payoff typically has broader eligibility requirements, making it easier for used cars to qualify.

To learn more, check out WalletHub’s guide to gap insurance.

Gap insurance is a waste of money if you are not financing your vehicle or if you could pay the difference between your loan or lease balance and the actual cash value of your car out of pocket. Gap insurance is never mandated by state law, and it is only sometimes required by lenders or lessors. Thus, it is up to you to decide whether gap insurance is worth the cost in your situation.... read full answer

Gap Insurance Might Be a Waste of Money When:

• You buy a used car. Used cars retain more of their value after purchase than new cars, so the gap between the loan or lease and the actual cash value of the car will be small. Therefore, you might be wasting money if you buy gap insurance on a used car.

• You make a large down payment. If you purchase a car for $35,000, for example, it’s actual value could fall to $29,000 in a year, leaving a gap of $6,000. But if you make a down payment of $6,000 or more and your loan balance remains below the depreciating value of your car, then gap insurance is unnecessary.

• You can cover the gap yourself. The difference between your car’s actual value and the balance on your loan or lease may be small enough that you could pay it out of pocket. If it’s not too much of a burden, this is the better option, as you will not have to pay for gap insurance.

• The cost of the policy is close or equal to the gap itself. If you would be paying the same amount for gap insurance as the gap in coverage itself, it makes more sense to skip the coverage and pay out of pocket if your car is totaled.

Ultimately, whether gap insurance is a waste of money depends on your individual situation. In many cases, gap insurance may be an unnecessary expense.

However, if you find that gap insurance isn’t a waste of money, WalletHub can help you find a policy that fits your needs.

To learn more, check out WalletHub’s guide to the best gap insurance companies.