The value of your new vehicle drops the moment it leaves the dealer’s lot. In five years, it’ll be worth only about 35 percent of what you paid, research shows.
If you took out a loan to buy the car, you’ll probably owe more than it’s worth for several years. That could be a problem if it’s totaled in a crash (or stolen and not recovered), because auto insurance policies typically cover only the value of your vehicle—not what you owe.
That’s where a GAP waiver can help. An acronym for “Guaranteed Asset Protection,” GAP compensates you for the difference between your outstanding loan balance and the vehicle’s actual value, potentially saving you thousands of dollars out of pocket if your car is declared a total loss. It’s an optional add-on when you buy your vehicle—but often worth the price for peace of mind.