Do I need gap insurance for my new 2021 Mercedes GLC300?
The purchase price was $49,000 and my loan is for $33,000. I declined gap insurance through the dealership, but do I need it? What would happen if the vehicle was totaled?
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Answered on May 07, 2021
“Since your loan is far below the cost of your new vehicle, you aren’t likely to need gap insurance, which covers the difference if you owe more on your loan than your vehicle is worth.
If your vehicle is deemed a total loss, your insurance company will determine the actual cash value of your vehicle, which is the original price minus depreciation. This is what you’d receive in a payout, and it should cover the balance of your loan.
If you’re unsure, you can calculate the depreciation on your vehicle in a year and what your loan balance will be in a year. If your math indicates that your loan balance may eventually exceed the car’s actual cash value, you can buy gap insurance then.
Most insurance carriers do offer some form of gap insurance, so you may be able to add it to your current policy. If you decide you no longer need it, you can easily remove it.
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