Should I get gap insurance for a used car? (2024)
You should get gap insurance for a used car if the loan exceeds its value since it pays out if your car gets totaled. Gap insurance is cheap, costing as low as $3/mo. So, consider your loan length, vehicle age, and whether your down payment is below 20%. See if gap coverage is worth it on a used car below.
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Jimmy McMillan
Licensed Insurance Agent
Jimmy McMillan is an entrepreneur and the founder of HeartLifeInsurance.com, an independent insurance brokerage. His company specializes in insurance for people with heart problems. He knows personally how difficult it is to secure health and life insurance after a heart attack. Jimmy is a licensed insurance agent from coast to coast who has been featured on ValientCEO and the podcast Modern Li...
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UPDATED: Sep 4, 2024
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Advertiser Disclosure: We strive to help you make confident auto insurance decisions. Comparison shopping should be easy. We are not affiliated with any one auto insurance provider and cannot guarantee quotes from any single provider. Our partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.
Editorial Guidelines: We are a free online resource for anyone interested in learning more about auto insurance. Our goal is to be an objective, third-party resource for everything auto insurance related. We update our site regularly, and all content is reviewed by auto insurance experts.
UPDATED: Sep 4, 2024
It’s all about you. We want to help you make the right coverage choices.
Advertiser Disclosure: We strive to help you make confident auto insurance decisions. Comparison shopping should be easy. We are not affiliated with any one auto insurance provider and cannot guarantee quotes from any single provider. Our partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.
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A top question readers ask is, “Should I get gap insurance on a used car?” You should get gap insurance for a used car if you finance it and the loan exceeds its market value, which could be the case for newer used vehicles, long-term loans, or loans without a down payment.
So, what’s gap insurance? Guaranteed auto protection (gap) insurance pays the difference between your loan amount and car value if your vehicle gets totaled.
Ready to compare the best auto insurance companies that offer gap insurance? Enter your ZIP code into our free quote comparison tool to find affordable gap insurance on a used car.
- Gap insurance pays if your loan exceeds your used car’s value after a total loss
- Consider gap for longer loans, newer used cars, and loans with no down payment
- Find gap insurance for your used car through the dealership or an insurer
When to Consider Gap Insurance for Used Cars
Is gap insurance needed on a used car? When you buy a new car, gap insurance is typically recommended. However, there are some instances where getting gap insurance for cars over 10 years old is necessary, for example.
Usually, when you buy a new car, it ceases to be new as soon as you drive it off the car lot. A new vehicle’s value typically depreciates by 15-25% the first year, and much of that happens right when you drive it off the lot. Unless you put down more than 25%, your loan balance could almost immediately be greater than the vehicle’s value.
Gap Insurance Example
| Details | Costs |
|---|---|
| Remaining auto loan principal | $25,000 |
| Actual cash value of vehicle | $20,000 |
| Insurance payment without gap insurance | $20,000 |
| Deficit without gap insurance | $5,000 |
| Insurance payment with gap insurance | $25,000 |
| Deficit with gap insurance | $0 |
Read More: Auto Insurance for New Cars
So, should you get gap insurance on a used car? There’s a lot to consider when getting gap coverage for used cars as we’ve outlined below.
Age of the Vehicle
Is gap insurance worth it for a used car that’s older? The rate of depreciation tends to be lower in each year of a car’s life. So, if you buy a six-year-old car with a loan, it may not be worth adding gap insurance as your loan balance will generally keep up with the depreciation rate. (Read More: Auto Insurance for Older Cars)
For older vehicles, the amount you pay for gap insurance is likely to outweigh the difference between the vehicle value and the amount remaining on the loan if you were to experience a total loss accident.
Learn More: Totaled Car Value Calculator
For cars three years old or newer, though, gap insurance may be a wise investment.
Length of Loan Term
Another factor you should consider is the length of your car loan.
Is gap insurance worth it for a used car with a long loan length? If you purchase a vehicle that is less than three years old with a loan term greater than 60 months, then gap insurance could be a wise investment.
This is because a longer-term loan means you are making lower payments each month, which often results in your vehicle’s value depreciating faster than you are reducing your loan balance.
Smaller Down Payment
A down payment reduces the amount of your loan in relation to your vehicle’s value.
So, is gap coverage worth it on a used car with a small down payment? If you put a lot down, you likely won’t need to buy gap insurance on a used car.
However, if your down payment is less than 20% and the vehicle isn’t very old, gap insurance could still be useful. The lower the down payment, the more useful gap insurance could be for you.
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Gap Insurance for Older Cars: Comparing Rates
Can you buy gap insurance on a used car for cheap? Gap insurance used car rates vary by insurer and vehicle type, but usually range from $3 to $20 monthly. Check out the table below to compare average costs from the top gap insurance providers for used cars:
Gap Insurance Rates by Provider
| Insurance Company | Monthly Rates |
|---|---|
| American Family | $4 |
| Auto-Owners | $4 |
| Erie | $5 |
| Farm Bureau | $8 |
| Farmers | $20 |
| Nationwide | $4 |
| Progressive | $3 |
| Shelter | $12 |
| State Auto | $4 |
| The Hartford | $9 |
| Travelers | $3 |
| U.S. Average | $7 |
Does Geico offer gap insurance? Unfortunately, you can’t buy Geico gap insurance, and many other top companies don’t offer it either. However, big names such as Progressive and Travelers offer gap insurance for as low as $3/mo.
Read More:
So, should you buy gap insurance on a used car from an insurance company or a dealership? As you can see, these top providers offer cheap gap coverage, whereas dealerships usually charge higher rates for gap insurance on a used car loan.
Importance of Gap Insurance for Used Cars
If your car is deemed a total loss in an accident, your full coverage auto insurance policy will typically pay out the value of the vehicle. When you have a loan, this payout goes to the lender first. However, if the value of the vehicle is less than your loan balance, you’ll owe the difference.
So, for example, is gap insurance worth it on a second hand car? It may be depending on its age, loan length, and down payment amount. With gap insurance, any difference between your loan balance and car’s value gets covered.
Imagine your vehicle is totaled and you still have $8,000 left on your loan. Your insurance company values your car at $6,800, so that's the maximum amount it will pay your lender. That still leaves you with $1,200 remaining on your loan balance. If you have gap insurance, that $1,200 will be taken care of by your insurer.Scott W. Johnson Licensed Insurance Agent
Read More: What do auto insurance companies do with totaled cars?
How to Get Gap Insurance on a New or Used Car
Should I buy gap insurance on a used car from the dealership or a third-party company? When you buy a new or used car, the dealership is likely to offer you gap insurance. This can be built into your financing terms and is the simplest way to add gap coverage on a used car.
However, buying gap insurance through your dealership is often more expensive than what you could get through a regular insurance company.
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— AutoInsurance.org (@AutoInsurance) March 14, 2023
Many car insurance companies, such as Allstate and Nationwide, offer gap insurance. You can read our Allstate auto insurance review and Nationwide auto insurance review for more information about the companies.
So, should I get gap coverage on a used car from my existing company? Since you may be able to add gap insurance to your auto insurance policy and qualify for a bundling discount, it may be worth considering. If not, you should shop around for insurance companies that offer gap coverage.
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When You Should Buy Gap Insurance for Used Cars
Is gap insurance worth it on a used car? Having gap coverage on a used car may be helpful under the right conditions. Gap coverage is worth considering if your vehicle is three years old or newer, your loan term is more than 60 months, and/or your down payment is less than 20%.
If you meet these criteria, it’s worth weighing your options for adding gap insurance to your used car.
As you know, comparing auto gap insurance online is worth it. Compare used car gap insurance rates right now by entering your ZIP code into our free auto insurance rates tool.
Read More: Where to Compare Auto Insurance Rates
Frequently Asked Questions
Do I need gap insurance on a used car?
You may be wondering, “Do you need gap insurance on a used car?” While your lender may require it as part of your loan agreement, no auto insurance law mandates gap insurance.
However, you likely need gap insurance for a used car if your loan term is greater than 60 months, the vehicle is less than three years old, and your down payment is less than 20%. Gap insurance covers the difference between your car’s value and your loan amount.
Can you have gap insurance on a used car?
So, can you get gap on a used car? Yes, you can buy gap insurance on used cars.
Do you need gap insurance when buying a used car?
Do I need gap insurance on a used car? Before you buy a used car, the lender may require you purchase gap insurance as part of the lease agreement.
When is it worth getting gap insurance on a used car?
Do I really need gap insurance? When you buy a new car, gap insurance is typically recommended due to the rapid depreciation in value.
However, for used cars, you should consider gap insurance if the vehicle is three years old or newer, your loan term is more than 60 months, and/or your down payment is less than 20%.
Why is it good to get gap insurance on a used car?
So, why is gap insurance worth it for used cars? If your car is deemed a total loss in an accident, your full coverage insurance policy will pay out the value of the vehicle.
However, if the value of the vehicle is less than your loan balance, you’ll owe the difference. Gap insurance covers this difference, ensuring you don’t have to pay out of pocket.
How can I get gap insurance on a used car?
You might be asking yourself, “How can I buy gap insurance on a used car?” When you buy a new or used car, the dealership may offer you gap insurance. However, buying gap insurance through the dealership can be more expensive.
Many car insurance companies, such as Allstate and Nationwide, offer gap insurance. You may also be able to add gap insurance to your current car insurance policy or shop around for insurance companies that offer gap coverage.
How much is gap insurance on a used car?
Can you get gap insurance on used cars at a low rate? Yes, gap insurance is relatively cheap, with rates ranging from $3 to $20 per month.
How can I compare gap insurance rates?
You can compare gap insurance rates by entering your ZIP code into a free auto insurance quote comparison tool. This allows you to view quotes from different insurance companies and find affordable gap insurance options.
So, what’s the gap insurance cost for a used vehicle? Generally, you’ll pay between $3 and $20 monthly for gap coverage from the top insurers.
What are the cons of gap insurance?
Gap insurance can increase your monthly car payments if you buy it from the dealership, but can you get gap insurance on a used car from a third party? You can usually get gap coverage from insurance companies for way cheaper.
Do you get gap insurance back if you don’t use it?
In some cases, you could get a refund for any unused portion of your gap insurance coverage.
Is gap insurance a good idea when buying a new car?
Usually, you should get gap insurance for a new vehicle, but it ultimately depends on your mileage and the rate at which your car depreciates.
Why would it not be a good idea to purchase gap coverage when purchasing a used car?
Is gap insurance necessary for a used car? Used cars depreciate slower than new cars, meaning it’s less likely you’ll develop a gap between your loan amount and the car’s value. However, it depends on your loan length, down payment, and vehicle age.
Does gap insurance cover the transmission?
No, your gap insurance won’t cover transmission failure. It only pays the difference between what you owe and your car’s value if it gets totaled.
What does gap insurance cover on a used car?
So, what does gap insurance for used vehicle cover? Gap insurance covers the difference between your loan value and car’s market value if it gets totaled. However, it won’t cover deductibles, overdue payments, or extended warranties.
Can you put gap insurance on a used car if you have a learner’s permit?
Yes, you can buy gap coverage for your used vehicle even with a learner’s permit if you’re the primary borrower on the vehicle loan or lease.
Learn More: Cheap Auto Insurance for Learner’s Permit Drivers
Does Farm Bureau offer gap insurance?
When it comes to used car gap insurance, is it worth it to consider Farm Bureau? Yes, you can buy gap coverage through Farm Bureau Bank.
Read More: Farm Bureau Auto Insurance Review
Is gap insurance necessary on a used car if I’ve made a small down payment?
So, do I need gap insurance for a used car with a tiny down payment? Yes, you should consider gap coverage for your used car if you didn’t put down a lot. A smaller down payment increases the likelihood that you’ll owe more on your loan than the car’s value.
Do I really need gap insurance if I have full coverage?
Is gap insurance worth it for used car owners with full coverage? Yes, you may still need gap insurance on your used vehicle, even with full coverage. Full coverage only pays for vehicle damages and doesn’t pay off the amount you owe on your loan or lease.
What is Infiniti gap insurance?
Infiniti’s gap coverage is a specialized policy for drivers who own Infiniti vehicles and finance them. This coverage is especially beneficial for luxury vehicles such as Infiniti since they often depreciate faster than the loan balance decreases.
Learn More:
Free Auto Insurance Comparison
Enter your ZIP code below to view companies that have cheap auto insurance rates.
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Jimmy McMillan
Licensed Insurance Agent
Jimmy McMillan is an entrepreneur and the founder of HeartLifeInsurance.com, an independent insurance brokerage. His company specializes in insurance for people with heart problems. He knows personally how difficult it is to secure health and life insurance after a heart attack. Jimmy is a licensed insurance agent from coast to coast who has been featured on ValientCEO and the podcast Modern Li...
Licensed Insurance Agent
Editorial Guidelines: We are a free online resource for anyone interested in learning more about auto insurance. Our goal is to be an objective, third-party resource for everything auto insurance related. We update our site regularly, and all content is reviewed by auto insurance experts.