Hey Hey~
Buying a new car is all-new territory for me, and just today I came across this little bit.

In case you don't know what this is, gap insurance covers the difference between what is owed on your new vehicle and what your insurance company will pay for it in case of an accident that totals the vehicle.

So I ask MINI financing what they want for gap insurance and I was quoted $495!

I asked my bro what he paid for gap insurance through Sovereign Bank and he's paying lesss than half that.

Anyone happen to know if it's possible to buy gap insurance elsewhere besides where I'm getting my financing?

 

Most major auto insurance carriers offer gap coverage as a rider or optional endorsement on their auto polcies, but many do not advertise it. Check with your agent for details regarding what your carrier may offer.

Before you purchase gap coverage, be sure to ask about the coverage limits offered, as well as the cost. Typically, gap coverage is limited to about 15% in excess of a vehicle's "actual cash value," or ACV. This is done to prevent fraud. Without this limit on coverage, an individual who was severely over-financed on a car might be tempted to destroy the car to have it declared a total loss, hoping to walk away from a large debt (a "moral hazard" in insurance-speak.)

(i.e. lose your job, torch the car, one less bill to pay. After all, it's not like you're driving to work anymore anyway, right? )

The fraud potential has become a serious concern today, thanks largely to "we'll pay off your trade no matter how much you owe" deals. The negative equity from the old loan is rolled into the new one. For example, suppose you buy a new $25,000 car, and wish to trade in your old car. If you are offered $5000 for your trade-in car, but still owe $10000 on it, the remaining $5000 balance on your existing loan is added to the $25,000 price of the new car, resulting in a new loan balance of $30,000. If a Hummer backs over your new car 2 weeks later and totals it, the ACV of the new car is still probably only $25,000 at best. More likely, it's actually a bit less than that, since most cars (our MINIs a notable exception!) depreciate in value rapidly during their first year of use; this starts the moment the car is driven off the lot by the owner after delivery.

After insurance pays the ACV (less deductible, if applicable), the remaining $5000 (or more) comes out of your pocket, unless you have gap coverage. Assuming best case for ACV, If you do have gap coverage, at 15% over ACV, you will be protected against overfinance amounts of up to 15% of $25,000, or $3750. In cases where no negative equity has been carried over from a prior loan, that 15% is usually sufficient to cover any overfinance loss you might incur. However, as the example illustrates, if you are way "upside-down," even gap coverage won't bail you out all the way.

Caveat debtor!

 

Check with your insurance company first because from my AllState insurance it only cost me $25 every six months. If you finance your MINI for 5 years that is only $25 and for 6 years $300.

 

My credit union provided me with gap insurance for $100 - total. You might look into credit unions for both better loan rates and better pricing for things like gap insurance.

 

When I was with Progressive my gap was $120/year. I am now with USAA and it is free since I am insured and financing the car through them.

 

FYI - Allthough USAA is great insurance if you qualify for it, they provide GAP insurance to every borrower that finances with them. You don't have to be insured with them too for them to give you the GAP coverage. I'm glad to hear you are no longer with Progressive, and you should be glad you never had to pursue a claim against your own policy. They are crooks, I'm working on two bad faith claims against them right now for what they did to some clients.

ADDRESSING THE ORIGINAL POST:

The $495 for GAP coverage is excessive, I'm sure what has happened is the dealership has hiked up the price to fleece some extra money from you. They do the same thing with interest rates...you may be qualified for a rate lower than what they are telling you (this is extremely common). The scary thing is that it's perfectly legal. Back in the day, the same thing was done with window etching, pinstriping, underbody protection, etc...the car dealers just got a little more savvy.

If I were you, I'd look for alternative financing, or at least tell the finance manager that you have a lower APR loan from a credit union with GAP coverage for $125.

Remember: EVERYTHING IS NEGOTIABLE.

 

Kind of hard to imagine the need for this. Unless you are paying way over MSRP or zero down payment the MINI is less likely to be "upside down" than almost any new vehicle. I'd say forget it.

Trying to insure against such a remote possibility seems like a major waste of money to me.

Granted this is changing somewhat, but the last time I checked the Kelly Blue book value on my 03 MC it was still more than the $18,735 I paid for the car. I now owe less than $10,000. This is with 5 year financing. A shorter financing term would, of course, leave you in even better shape.

 

I don't know if it has since changed, but at one point, MINI Financial offered free gap insurance with each leased car. I don't know about purchased/financed - apparently not.

 

We decided against Gap insurance when our Credit Union Rep put the 05MCS and showed us a graph that proved it unnecessary. There were two lines. A red curved line showed the value of the car from day one to 5th year. A blue line showed the payments made over time. Let's just say the red line was ALWAYS above the blue one and curved slightly upward toward the 4th and 5th year, thus increasing the gap of better value than what's owed.


How's that for a happy answer? When you credit union tells you to NOT buy a product because it's not in your best interest or is not needed.

 

I don't think I had even heard of Gap Insurance until this thread. If you are buying a car that needs Gap Insurance you probably should consider buying something else.

 

Yeah, the MINI is probably the last car you would ever need it for.

 

In State of Texas, gap is determent by a percantage of the MSRP, you can buy it only at the time of the purchase of your vehicle and that percentage is set by law.

 

GAP is a really good thing to consider when you buy your car. I've had several clients save several thousand dollars because their car was totalled after owning it for less than a year. The depreciation of the car is not the only thing to consider, you should also know that getting a decent ACV (Actual Cash Value) calculation from an insurance company is a royal pain in the ****.

If you are paying a couple hundred bucks for GAP, it's worth it just for the peace of mind. In general, it makes REALLY good financial sense if you are buying your car with the lowest possible down payment, and get a low interest rate for a term of four or more years.

Average loan rates for buying a car are extremely low these days. It makes sense that you capitalize on the cheap money. My grandfather always told me that I should never carry a car note. Well, times have changed...for the better. What he should have told me was to never carry a balance on my credit cards.

 

If you buy a luxury sedan like maybe a Jaguar or a grossly overpriced SUV and if you pay MSRP or close to it and if you total the car and if your crummy insurance company tries to screw you on the value of your vehicle, then you might need to deal with another insurance and/or company to try to collect the money the first company should have paid you.

Loan rates being low should be a plus for not needing Gap insurance because more of each payment goes to principle rather than interest, helping reduce or eliminate the "upside down" time with your car loan. This "upside down" time never existed with my MINI and is very unlikely to have existed with anyone else's MINI.

I'd recommend talking to your insurance company about how they determine actual cash value if you total your car. That information could be a reason for picking one company over another.

I'm sure someone will sell you insurance to pay for a meteor crashing into your house and they will cover meteor damage not covered by your homeowners, do you need it? Probably not.

 

As others have said, you need to consider the value of a MINI. We decided against GAP insurancewhen buying the MINI because the value of it remains high and we have a great insurance company/agent that we aren't too worried about screwing us with the value of hte car if something were to happen. When we bought our Evo however, we decided to get GAP insurance as the value of those cars decreases rather quickly, certainly faster than the MINI and has a higher probability of leaving you upside down if it were to get totalled in the first couple of years. Basically, it's up to you and what kind of confidence you have in being able to cover any leftover on your loan if the car were to be totalled.

 

I don't deal with auto insurance, but I have adjusted claims on travel trailers, boats, jet-skis, etc. To determine ACV, I would look at NADA. I think if your insurance company tells you your car was worth less than the NADA value, you could take them to court and win easily.

 

I've had gap insurance on both of my MINIs.
With the first car, I had never heard of it before, but it seemed like a good idea. Then I had a non-MINI friend total her car, and because she didn't have gap insurance, she was royally screwed.

I didn't even think twice about getting it on this car also. It's great just as a precaution.

 

I guess if it makes you feel good it's worth it. There was absolutely no way you would ever have collected anything from the Gap insurance on the 02 MINI usless you paid $5,000 over MSRP for it, even then it would have been tough. If you paid nothing down and MSRP or more on the 05 and financed it for 5 years or so and total it in the first year or two I suppose there is a very slim chance you possibly benefit from it.

Insurance people have to make a living too.

 

Litigation isn't always the best answer. Remember, a guide book is just that- a guide. A number out of a book is meaningless unless it is placed in proper context.

Guide books have limitations- geography is one. A guide based on national average resale prices may not accurately reflect local market condtions where a vehicle is garaged. For instance, a MINI that sells for MSRP in Ohio can sell for considerably more in California, due to market demand.

ACV is supposed to represent the actual price the car could have been expected to sell for if it had been offered for sale in the owner's local market, given the condition the car was in immediately before the loss occurred. For MINI owners in California, this means that if cars similar to theirs are fetching $3000 over MSRP because people will pay that in order to avoid waiting 6 months and paying full dealer markup to order one, then the policy owes $3000 over MSRP- even if the owner paid less than this when they bought the car.

As this example illustrates, a settlement offer based solely on national average figures, rather than local conditions, has the potential to be very unfair.

There are certain vehicles (show cars, antiques, prototypes / concept cars, etc.) which may require an individual appraisal, as there is no published guide available for reference. Independent appraisals are also sometimes used to resolve disputes, if the owner and the insurance company cannot reach an agreement on ACV.

The biggest points of contention vehicle owners have with total loss valuations are:

1) "The insurance company is low balling me. They didn't offer book value." In this case, the settlement offer is not equal to or higher than the number the owner looked up in NADA (or Kelly Blue Book, etc.) before discussing the settlement with the adjuster. Usually, the reason for the difference has to do with the condition of the specific vehicle involved in the claim. Many consumers assume that they are owed full "retail" value, but the actual condition of their car does not meet that standard. Unrepaired or improperly repaired prior damage, excessive wear for the vehicle's age and milage, etc. all have a significant negative impact on the ACV. If it would take anything more than a good wash and vacuum for a legitimate dealer to be able to put the car out on the lot for sale, it's not in "retail" condition.

Fortunately, that's not an issue for many of us. The MINI is an enthusiast car, and usually receives much better care and upkeep than the typical commuter lump. Some of the MINIs I encounter at group gatherings could be classified as "exceptional" (you Detailing 101 junkies know who you are!)

2) "The offer doesn't pay back the money I put out for customization." In general, money spent on non-oem modifications does not increase the overall value of the car by anything near the amount invested to purchase the modifications. Items that replace or "upgrade" factory parts (such as stereos, wheels, etc.) do little to increase ACV, because the average used car buyer usually isn't willing to pay a significant premium for such a car vs. one that is stock. Certain other mods, such as some body kits, loud exhausts, etc., can actually detract from the value of the car.
(Click here for a few examples.)

One notable exception to this in in cases where the owner has purchased a rider or endorsement to their policy to cover specific non-stock items.

Another way to recoup money tied up in mods is to remove the custom parts involved, and reinstall the stock parts. (You did save them when you took them off, right? :smile: If you already sold the take-off parts, you've already recovered some of those ACV dollars.) Discuss this option with the adjuster; most are OK with removing mods as long as doing so doesn't materially affect the salvage value of the car (such as leaving a decklid full of holes by unbolting a spoiler.) For practical reasons, some "repatriated" stock items (such as wheels/tires) have to be reinstalled on the car. For others, such as stereo head units, just placing the stock bits in the car, or turning them over to the ins. co., is sufficient. After all, a salvage company is only going to remove the parts again when they dismantle the car.

That said, bear in mind that returning a car to stock specification may affect the ACV amount, for better or worse. For instance, if a car's value was calculated with aftermarket alloy wheels fitted, removing these and refitting OEM alloys should not affect the ACV determination, as the substituted item is of similar type. However, if steel wheels are refitted, the ACV will be adjusted to take this into account (reduced.) Similarly, if the tires on the (removed) aftermarket alloys were nearly worn out, but the tires on the refitted OEM wheels are nearly new, an adjustment to the ACV will also need to be made (increased.)

As a consumer, the most important thing you can do is to ask questions. Ask for a copy of the ACV evaluation report and review it carefully. Make sure that the options, milage, and condition of items listed on the inspection report accurately matches your vehicle. If something was missed, or you find errors, ask to have these corrected. Even a few overlooked items can have a significant impact on an ACV evaluation. If you still believe that the settlement offer is not accurate, be prepared to provide evidence to support this, such as recent classified ads for similar vehicles from local publications, etc. Maintenance records, especially for major repairs, also help.

Remember- the burden of proof for a loss (extent as well as occurence) ultimately lies with the party making a claim. Be properly prepared, and you may be pleasantly surprised with the result.

 

Resmini-I'm puzzled by some of the assumptions that you are making. First you are saying if you pay for an "overpriced car" like a Jaguar or an SUV, and your insurance company makes you a "crummy offer" you could collect from both your insurance company, and the other party's company to make up the difference? That's not true. You can only make one claim for a total loss, and FYI it doesn't matter what kind of car you drive.

Are you also saying that GAP is only good for "overpriced cars?" Would that include the Mini being priced a few thousand over MSRP? That $200-300 spent on GAP would be pretty useful in a situation like that. Even if you didn't spend over the MSRP, you are driving a depreciating asset. The Minis hold their value well, but they still depreciate the moment you drive off the lot...and loan amortization tables work the same way no matter what the rate...you are ALWAYS paying mostly interest in the beginning and less interest as time goes on.

As far as figuring out how insurance companies calculate the ACV, ALL the major insurance companies use a service called ADP or CCC. These independent companies research what your style of car is selling for on the open market by using actual sales data in your area. They don't care how much you spent over MSRP, nor do they care what is in the Blue Book, or NADA guide...as those are consumer guides.

Resmini- You had never heard of GAP insurance until this thread, and now you are listing the many reasons why it doesn't make sense. I was considering the source when I read your reply to my post, but now I've spent 10 minutes out of my day to rectify your flawed logic. I just didn't want some poor soul searching NAM for info on GAP insurance to read your post, and not take it for the knee-jerk, spitball logic that it is.

By the way, I have nothing to do with selling Insurance, but I have made countless claims against insurance companies for people over the past 10 years. I have encountered many different situations in the past, and I have seen too many people hurt financially due to improper planning, or plain old bad advice.

 

Well, you caught me red handed. I said I don't know anything about Gap insurance and I guess my post proved it.:smile:

Everyone's situation is different. One case I know something about would be my 03 MC. It's MSRP was $19,085. I financed $16,085 at 3.99% for five years. At no time did I owe more on it than my insurance would pay if it was totaled, without the need for "Gap" insurance. I believe most MINI owners would be in a simular situation.

The reason I mentioned the Jaguar or an overpriced SUV is because of the tremendous depreciation you take on these vehicles from the get-go. Some Jaguars will depreciate $20,000 when you drive them off the lot. I could see how this might generate a justifiable need for something like Gap insurance.

We were, however, discussing Gap insurance for the MINI, not an SUV or luxury sedan of some type. If people want to spend their money for something they are so unlikely to need that's their business. I just hope they consider their specific situation and don't buy Gap insurance just because the salesman said it's a good idea.

If you're going to fork over $300 for Gap insurance on a MINI I'd recommend just applying the $300 to the cost of your MINI, that'd reduce your gap right off the bat and the money was spent in a useful way, even if you don't total your car.

Sorry about the 10 minutes of your day I caused you to lose.:smile: