A new car is often the second largest investment a person makes, yet most American drivers overlook the financial risk that comes with this investment. The danger: If your costly vehicle is stolen or totaled in an accident, you may still be liable for paying it off.
American drivers owed a record $839 billion for their automobiles in the second quarter of 2014, according to credit reporting agency Experian, and vehicle debt per capita has steadily been increasing over the past several years. For example, car owners in Florida now owe one-third more auto debt per capita than they did just 15 years ago.
With vehicle debt becoming one of the biggest burdens on the American wallet, there is an affordable way for American motorists to safeguard themselves: Guaranteed Asset Protection, or GAP, waivers, which can protect against unexpected and sometimes financially devastating costs.
“Many people don’t think about the hidden risks involved in financing a car,” said Tim Meenan, executive director for the Guaranteed Asset Protection Alliance (GAPA). “The greater the cost of a new vehicle, the greater the debt – and the risk. But GAP coverage can provide an important safety net to protect consumers from facing this crippling obligation.”
GAP waivers reduce your risk by covering some or all of the gap between what you owe and what your car is worth if it is totaled in an accident or stolen. Many consumers recognize that once they complete a car purchase and drive off the lot, the vehicle immediately depreciates in value. However, the majority of people don’t realize that if the car is totaled or stolen, most insurance companies will pay the current market value of the car – not the full amount owed to the finance company.
This leaves the burden of payment on the owner, who is still obligated to pay the full amount owed. At the same time, he or she has to deal with the stress of finding the funds to purchase a new vehicle. This scenario is more common than you’d think, and it’s exactly where a GAP waiver can really help.
GAP, purchased from a dealer or lender at the time the car is bought, relieves most or all of the purchaser’s obligation to pay off the finance agreement. With this extra debt removed, it’s easier for the consumer to get a replacement vehicle. At a time when many automobile owners face growing debt and the financial uncertainty it brings, GAP waivers offer an assurance that cannot be understated.
“The more automobile debt you take on, the more important it is to have a plan for paying off that debt following unforeseeable misfortune,” said Meenan. “GAP waivers offer not only protection against your remaining debt, but also the peace of mind of knowing that you have a plan for the future no matter what happens.”
SOURCE Guaranteed Asset Protection Alliance