GAP, Warranty, Payment Protection- What Does It All Mean?

If you've purchased a car or shopped for an auto loan recently, you have probably heard the terms "GAP, Warranty, and Payment Protection." And, if you're thinking of purchasing a new (or new to you) car, you most likely will hear them in the near future. But, what, exactly, do those terms mean? And, are those add-ons a good idea? Read on to find out!

GAP. Guaranteed Auto Protection, or GAP, can fill the gap between what your insurance will pay and what you owe on your loan, if you have an accident and your vehicle is deemed a total loss. In the current market, during the first few years that you own your vehicle, your loan/lease balance can be higher than the actual value of your vehicle, as a result of depreciation. As your vehicle's value declines, your loan/lease balance may decline more slowly resulting in a financial gap. If your vehicle were stolen, or totaled in an accident, you would be liable to pay the difference between your insurance settlement and your outstanding loan/lease balance.

Gap is a voluntary, non-insurance product designed to waive the remaining loan balance not covered by your primary insurance carrier settlement in the event of a total loss or unrecovered theft, subject to limitations and exclusions, including but not limited to loan to value (LTV) maximum, delinquent payments, late charges, refundable service warranty contracts and other insurance related charges.

GAP covers the difference between your outstanding loan balance and the actual cash value (ACV) of the vehicle up to the maximum LTV%. Gap may also cover up to $1,000.00 of the borrower's deductible if there is a "gap" after the primary insurance settlement is paid.*

Payment Protection. Credit insurance can help you make sure you're covered if you can't make loan payments due to unexpected illness or injury. This type of insurance is intended to help pay off or reduce the loan. Savings, salary or payments from other life insurance may be protected, giving your family financial freedom when they need it. This type of insurance can be easily added to your monthly loan payment, so there is no need to come up with the premium up front.

Warranty. Mechanical repair coverage protects your vehicle from the cost of expensive repairs not covered by your manufacturer's warranty. Even the most reliable vehicle can develop a mechanical problem. That's why so many people choose to include an additional warranty when they purchase a new car. This is especially true when purchasing a used car.

This type of coverage can also easily be added to your monthly loan payment, so there is no need to pay the premium up front. In general, a warranty purchased through your credit union lender is significantly less expensive and more robust than vehicle service contracts offered by auto dealers. Most warranties purchased at the dealer cost as much as 60% more for similar coverage than those offered by your Credit Union. In addition, most of the time, you will be required to use the dealer facility for any repairs completed under the warranty. When you purchase a warranty through your lender, you have the freedom to go for repair service wherever you like.

Don't forget to consider GAP, Warranty and Payment Protection products when purchasing your next car. These products can make a huge difference when you run into issues, whether it be a vehicle breakdown, illness or accident!

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