When a vehicle is totaled or stolen, your auto insurance typically pays out the current market value of the vehicle. But if you owe more on your loan than what the vehicle is worth, that gap between what insurance pays and what you still owe comes out of your pocket. Guaranteed Asset Protection (GAP) is designed to cover that difference. This article explains how GAP works, what vehicles it covers and how to add it to your Firefighters First vehicle loan.
Most people assume their auto insurance will fully cover them if their vehicle is totaled or stolen. In many cases it does not. Standard auto insurance pays out the current market value of your vehicle at the time of the loss, which may be significantly less than what you still owe on your loan.
That difference is your responsibility unless you have GAP coverage.
Guaranteed Asset Protection (GAP) is an optional product available on Firefighters First Credit Union vehicle loans. It is designed to pay the deficiency balance, the amount left over after your insurance payout, so you are not stuck making payments on a vehicle you no longer have.
How Does GAP Coverage Work?
Here is a straightforward example of how GAP works in practice:
You purchase a vehicle and finance $35,000. A year later the vehicle is totaled. Your auto insurance determines the current market value of the vehicle is $28,000 and pays that amount out. You still owe $32,000 on your loan. Without GAP coverage, you are responsible for the $4,000 difference out of pocket. With GAP coverage, that $4,000 deficiency balance is covered.
The exact amount GAP covers depends on the terms of your contract. Coverage is subject to eligibility and exclusions as outlined in your signed GAP waiver agreement.
Why Is GAP Worth Considering?
Vehicles depreciate quickly. In many cases a new vehicle loses a significant portion of its value within the first year of ownership. If you financed a large percentage of the purchase price, it is common to owe more than the vehicle is worth for a portion of your loan term. This is sometimes called being underwater on a loan.
GAP is worth considering if any of the following apply to you:
- You made a small or no down payment on your vehicle
- You financed 100% or close to 100% of the purchase price
- You have a longer loan term of 60 months or more
- You are financing a vehicle that depreciates quickly
- You want protection against an unexpected out-of-pocket expense in the event of a total loss
What Vehicles Does GAP Cover?
GAP coverage at Firefighters First Credit Union is available on a wide range of vehicles with no model, mileage or year restrictions. Eligible vehicle types include:
- Autos, vans and light trucks
- Motorcycles
- All-terrain vehicles (ATVs)
- Jet skis
- Snowmobiles
- Golf carts
- Boats
- Motorhomes (RVs) and travel trailers
Maximum loan amounts, loan terms and coverage limitations vary by vehicle type. Your lending team member will walk you through the specifics that apply to your vehicle when you apply.
What GAP Does Not Cover?
GAP is designed to cover the deficiency balance after a total loss or theft, but it does not cover everything. Some common exclusions include:
- Delinquent payments or missed payments more than 60 days past due at the time of loss
- Late charges, fees or amounts added to the loan after it was originated
- Your primary insurance deductible in excess of $1,000
- Leases or balloon note loans
- Vehicles with branded titles such as salvaged, rebuilt or reconstructed
This is not a complete list. All exclusions are outlined in your signed GAP waiver agreement. We encourage you to read your agreement carefully and reach out to us if you have any questions about what is and is not covered.
The 60-Day Free Look
When you add GAP coverage to your loan, you have 60 days to review your agreement at no cost. If you decide during that period that it is not the right fit, you can cancel without penalty.
This gives you time to read through your signed agreement, understand exactly what is and is not covered and make a confident, informed decision.
How Do I Add GAP to My Loan?
GAP coverage can be added to your vehicle loan during the application process. If you already have a vehicle loan with Firefighters First Credit Union and want to explore adding GAP, contact us directly and we will let you know what options are available.
Disclosure
Not NCUA Insured • Not Credit Union Issued, Guaranteed or Underwritten • May Lose Value
