GAP Insurance: Should You Buy It from the Dealership or Your Insurance Company?

When you’re purchasing a new car, you're probably thinking about monthly payments, warranty coverage, and how good it looks in your driveway, not necessarily how you’d handle a total loss situation. That’s where GAP insurance comes in. If you're financing or leasing, this coverage could save you thousands.

So what exactly is GAP insurance, and where’s the best place to buy it? The dealership or your insurance company? Let’s break it down.

What is GAP Insurance?

GAP stands for Guaranteed Asset Protection. It covers the “gap” between what your car is worth (its actual cash value) and what you still owe on your loan or lease if your car is totaled or stolen. For example, if your car is totaled in an accident and your insurance company pays out $22,000, but you still owe $26,000 on your auto loan, GAP insurance could cover that $4,000 difference.

Now you may be asking, how do I acquire this insurance? You have two options.

Option 1: Buying GAP Insurance from the Dealership

Pros:

• Convenient: It’s offered right at the time of purchase, so it’s one less thing to think about later.

• One-time payment: Often a flat fee, paid upfront or financed into your car loan.

• May be available even if your insurer doesn’t offer it: Not all insurance companies provide GAP coverage, so the dealership might be your only option in some cases.

Cons:

• More expensive: Dealership GAP insurance typically costs more than getting it through your insurer.

• You may pay interest: If it’s rolled into your loan, you’ll likely pay interest on it.

• Harder to cancel: If you sell or refinance your car early, it may be more difficult to remove or get a refund.

Option 2: Buying GAP Insurance Through Your Auto Insurance Company

Pros:

• Lower cost: Insurance companies usually charge a small additional premium, often just a few dollars per month.

• Easier to cancel: If you pay off your loan early, trade in the car, or refinance, you can remove the coverage with a quick phone call.

• Bundled benefits: It’s easier to manage when all your coverage is with one company.

Cons:

• Not all companies offer it: You’ll need to check if your current insurer includes GAP coverage.

• Eligibility may vary: Some insurers have rules about when and how GAP can be added—like limits on vehicle age or mileage.

So, Which is Better?

In most cases, buying GAP insurance through your auto insurance company is the smarter, more cost-effective option. It’s generally cheaper, more flexible, and easier to manage long-term. However, if your insurer doesn’t offer GAP or you're looking for ultimate convenience at the time of purchase, dealership GAP might be a suitable alternative.

The Bottom Line

If you’re financing a new or used vehicle, especially with a low down payment, GAP insurance can offer valuable peace of mind. Just make sure you compare both options and understand what you're paying and what you're getting.

Still have questions about whether you need GAP insurance or which option is best for you? Give one of our agents a call, we'd love to chat with you!

(207) 363-7894 | www.tapleyagency.com | 300 York St . PO Box 808 . York, Maine 03909