Do You Need Gap Insurance? »

Do You Need Gap Insurance?

So, you've already gotten a great deal on a new car lease using You've rolled the downpayment, taxes, title and other fees into your monthly lease payments, so your costs will be zero at the lease. Do you need to buy gap insurance to cover yourself in case of theft or severe damage?

By rolling all the costs associated with the car into the monthly lease payment, it IS possible that you would owe more than the car was worth if you experienced a total loss soon after the start of the lease term. Gap insurance bridges the gap between what a car is worth and what you owe at the time of the loss, and would provide you the protection from that cost. However, you may not need to purchase it.

First, find out whether gap insurance is built into the contract. Keep in mind the term "gap insurance" may not be used in the contract, and a more general term such as "lease coverage" might be used instead.

If gap insurance coverage isn't built into your car lease contract, then you may want to supplement your current auto insurance policy or purchase it separately. The general formula is that a car loses about 10 percent of its Manufacturer's Suggested Retail Price the moment it's driven off the lot. So compare your total cost, including taxes and everything you rolled into the lease, to the car's MSRP, and see if you have a "gap" from the start.

Keep in mind that the "gap" is constantly changing as you make your monthly payments and the car depreciates. So you definitely won't need the coverage for your entire lease term. In fact, you may only need it for a few months, depending on the deal you negotiated.

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