When I sold cars, we had very in-depth sales training. One facet of the car sales business we were well educated about was leasing a car as opposed to buying a car outright. This article is to help pass on what I learned from my car sales training about what I learned about leasing cars. There are a lot of misconceptions and inaccuracies about leasing a car as opposed to buying a car. This article will discuss GAP insurance.
When it comes to insuring a leased vehicle, it would probably seem like a good idea to stick with your current auto insurance carrier. However, what you don’t realize is that you may wind up paying more than if you would do a little rate shopping. If you lease a vehicle, the vehicle is owned by the company which leased it to you. Therefore, if anything bad happens to the vehicle, you will still be responsible for paying off what you owe on the vehicle.
In the event of an accident, you may not be fully covered by your insurance agency. There could be a difference between what your insurance would pay out to you and what your outstanding debt is to the lease company, at the time the vehicle gets stolen or damaged. The insurance that covers this difference is known in the leasing industry as GAP; which stands for Guaranteed Auto Protection.
GAP is typically contained within the leasing contract, especially if the name of the leasing company is the same as the name of an automaker. For example, if the name of your leasing company is something like the following: Ford financing service, or General Motors financial, etc. If this is the case, it’s probable the GAP insurance will be offered by the same company.
It’s important to understand, you are not required to sign up for GAP insurance as part of your lease. If you are at the dealership, they may use some high pressure sales tactics for you to agree to sign up for GAP insurance. Don’t let this happen. Find out what rate they are offering you and use your cell phone to call your current insurance agency and see if they will give you a better rate.
It is to your benefit to price shop GAP insurance rates. In fact, you may even get a better GAP insurance rate at a different agency than your current insurance agency. Most leasing companies, at a dealership, will try to further pad their bottom line by charging higher rates than what you could get somewhere else. Don’t pay more for the same coverage you could get cheaper somewhere else!
A word of caution; just because GAP insurance is not required, it is highly suggested that you get it. As mentioned, if your vehicle is stolen or totaled, the insurance company may not give you enough money to cover what is left on your leasing contract. In other words, you may owe thousands or tens of thousands of dollars on a vehicle that you have no use of. Don’t let this happen to you.