Do You Need GAP Insurance | Fox Toyota

If you're in the market for a new Toyota, congratulations! You're on your way to getting a reliable, high-quality vehicle for driving in Auburn, New York. But, have you considered the impact of depreciation and the potential gap between your car's value and the remaining balance of your auto loan? We at Fox Toyota want to explain why you may need gap insurance on your new Toyota.

The risk of negative equity

When you drive home from our car dealership Auburn, your brand-new Toyota starts losing value, regardless of whether it's a RAV4 or a Prius. At the same time, your auto loan balance is gradually paid off at a slower pace. This difference in monetary amounts leaves you vulnerable to a shortfall in the event of an accident or theft. Suddenly, you'd have loan payments for a car that you no longer have. This is what's known as having negative equity.

Limitations of GAP insurance

It's important to note that GAP insurance doesn't cover everything. If you get into a collision with your Toyota Corolla, it won't pay for repairs. It also doesn't cover loan rollover balances, extended warranties, down payments, missed loan payments, or bodily injury expenses. It's not a replacement for regular auto insurance, but rather a supplement to it.

What is GAP insurance?

This is where GAP insurance comes in - a solution to the potential finance crisis created by negative equity. GAP insurance stands for "Guaranteed Asset Protection," and covers the gap between your Toyota's current worth and the remaining balance on your auto loan. While full automotive insurance only covers the fair market value of your vehicle, GAP insurance will pay off the remaining balance on your loan in the event of a total loss.