Why do I need a gap waiver?

I'm getting a new 2021 Ford Bronco. The dealership is offering me a gap waiver. The salesman said it's important to have on a new car, but why?

Answer
“When you purchase a new vehicle, it depreciates very quickly. On average, a brand new car can depreciate up to 20% in the first year and 10% each subsequent year.
For example, if you purchase your new car for $25,000, it may only be worth $20,000 after a year. However, the amount of your loan won’t decrease as quickly. This means you could owe more on your loan than your car is worth.
This is why a gap waiver, also known as gap insurance, is important. If your vehicle is a total loss, your gap waiver covers any difference between the balance of the loan and the actual cash value of your vehicle.
While you may not always need gap insurance, it can be a beneficial coverage to have the first few years of ownership until you reach the break-even point between the loan balance and the value of the vehicle.
Remember that you don’t have to purchase a gap waiver directly from the dealer. In most cases, buying a policy from an insurance company is the cheaper route. Use the Jerry app to compare rates on insurance for your new car and quotes for gap insurance.”
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Emily Maracle
Answered on Aug 16, 2021
Emily Maracle is a car insurance specialist living in New York. Originally from the Pacific Northwest, she has a degree in English Literature and a background in customer service. She enjoys cooking, gardening, and living sustainably. In the future, she can't wait to upgrade to a hybrid or electric car.
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