Owning a car comes with more costs than just the monthly payment. Between maintenance, auto insurance, and unexpected accidents, your vehicle can quickly become a financial liability, especially if you’re not properly protected.
When refinancing your auto loan, it’s not just about securing a lower rate or monthly payment. It’s also the perfect opportunity to consider auto loan add-ons that safeguard your finances. Two of the most valuable options available are GAP insurance and depreciation protection. Let’s look at them in more detail below.
GAP Insurance and Why You Might Need It
Guaranteed asset protection (GAP) insurance bridges the “gap” between what you owe on your auto loan and what your auto insurance pays if your vehicle is totaled or stolen. This add-on is particularly helpful in the following situations:
- You have a long loan term
- You made a low or no down payment
- Your vehicle depreciates quickly
For example, if your car is totaled and your insurance payout is $14,000, but you still owe $18,000, GAP insurance covers that $4,000 shortfall. This protects you from paying out-of-pocket for a car you no longer own.
What is Depreciation Protection?
Depreciation protection, also known as a vehicle value protection plan, helps recover the original value of your vehicle in the event of a total loss. Unlike GAP insurance, this benefit applies even if you’ve paid off your loan. It’s great for newer vehicles or for buyers who want to avoid losing their auto investments due to depreciation.
If your vehicle is declared totaled, this protection plan ensures you’re reimbursed based on the vehicle’s original value, not its depreciated market price. This helps you replace it without starting over financially.
GAP vs. Depreciation Protection
While both are designed to protect you in case of a total loss, GAP insurance covers the difference between your loan balance and your insurance payout. Depreciation protection, on the other hand, restores lost vehicle value from depreciation. Many brokers, including Gravity Lending, offer these auto loan add-ons as a convenient bundle during refinancing.
Why Add Them When Refinancing Your Auto Loan?
Refinancing resets your loan and offers the chance to add valuable protections. Bundling GAP insurance, depreciation protection, and other auto refinance protection options spreads the cost over time and secures your vehicle at today’s value.
The Peace of Mind Factor
Whether it’s an accident, theft, or sudden total loss, you deserve financial protection. Combining these add-ons with extended warranties or loan protection insurance ensures full-circle coverage.
Ready to Secure Auto Refinance Protection?
Refinancing your auto loan is the smart time to add GAP insurance and depreciation protection. These essential auto loan add-ons can save you thousands and offer priceless peace of mind. Visit our suite of products that can help, or ask Gravity Lending how GAP and depreciation protection can safeguard your auto investments and peace of mind.