Information On Guaranteed Auto Protection (GAP)

When a borrower applies for auto financing, they may also be offered Guaranteed Auto Protection (GAP). This program was designed to protect the borrower from unexpected financial obligations when the vehicle is declared a total loss from accidents or situations involving theft or disaster. GAP should pay the difference between the vehicle's market value and the balance left on the financing contract including some of the auto insurance deductible. If a borrower does not have Guaranteed Auto Protection then they are required to pay off the financing even if the car is written off. Insurance companies only pay a certain amount so the borrower is obliged to pay the balance.

The protection against financial loss that is offered by GAP is due to the depreciation of the value of the vehicle. Vehicles generally depreciate at a much faster rate than the loan payoff balance and if a car is totaled or stolen then a balance may be left on the loan. This is why GAP covers the difference between the actual cash value of the vehicle and the outstanding loan balance at the time of the loss of the vehicle. GAP can only be accessed at the time of purchase and can provide a huge help for people who have lost their car and need to buy another while still owing a balance on the totaled car.

More Glossary Terms Explained here

Suggest an Article

Haven´t found the article you are looking for, please suggest your article. We value all your suggestions and comments.