Finance Calculator
GAP Insurance Calculator
GAP (Guaranteed Asset Protection) covers the difference between what you owe and what your car is worth if it's totaled or stolen. Find out if you need it.
Your Situation
Use KBB or Edmunds to check current value.
Coverage Gap
You're underwater — GAP insurance recommended.
Loan Balance
$28,000
Car Value
$22,000
Insurance Pays
$21,500
You'd Still Owe
$6,500
When Does the Gap Close?
Do you actually need GAP insurance?
GAP insurance exists because of a simple timing mismatch: in the first couple of years, a financed car loses value faster than you pay the loan down. If the car is totaled or stolen during that window, your regular insurer only pays the car's actual cash value — leaving you to cover whatever you still owe out of pocket. GAP closes that gap. The calculator above shows exactly how big yours is today and roughly when it disappears.
Why new-car buyers end up underwater
A new car can shed 20% of its value in the first year and around 40% over three years. Meanwhile your early loan payments are mostly interest, so the balance drops slowly. The result is that for the first one to two years of a typical loan you owe more than the car is worth. Put a small amount down or take a long term, and that underwater period stretches out even further.
Who should buy it — and who can skip it
GAP is worth it if you put less than 20% down, financed over 60 months or more, rolled negative equity from a trade-in into the loan, bought a model that depreciates quickly, or are leasing (many leases include it). You can safely skip it if you made a large down payment, bought a used car at a low loan-to-value, or the coverage gap shown above is already zero — you have equity and nothing to protect.
Where to buy GAP — and where not to
This is where most buyers overpay. Dealers and lenders sell GAP as a one-time fee of $500–800 rolled into the loan, which means you also pay interest on it. Your own auto insurer usually adds the same protection for just $20–40 a year — often five to ten times cheaper over the life of the loan. Credit unions frequently offer inexpensive GAP too. Decline it at the dealer's F&I desk and add it to your existing policy instead.
How to cancel and get a refund
If you already bought dealer GAP and later pay the loan off early, refinance, or sell the car, you're usually entitled to a prorated refund of the unused portion. Contact the dealer's finance office or the GAP provider in writing to request it — refunds are almost never issued automatically.
Frequently asked questions.
What is GAP insurance?
GAP (Guaranteed Asset Protection) insurance pays the difference between your loan payoff and your car's actual cash value (ACV) if your car is totaled or stolen. Without it, you'd pay the gap out of pocket.
How much does GAP insurance cost?
Through your auto insurer, GAP coverage typically costs $20–40/year added to your policy. Dealerships offer it as a one-time fee of $500–800 rolled into the loan — always buy from your insurer, not the dealer.
When should I drop GAP insurance?
Once your loan balance falls below your car's market value, you no longer need GAP coverage. This typically happens 2–3 years into a 5-year loan for most vehicles.
Does GAP insurance cover my deductible?
Some policies do and some don't. Many GAP policies pay only the difference between the loan balance and the insurer's payout; others also cover your deductible (typically up to $1,000). Read the terms — deductible coverage is a meaningful bonus worth asking about.
Who really needs GAP insurance?
You benefit most if you made a small down payment (under 20%), took a long loan (60+ months), rolled negative equity from a trade-in into the new loan, or bought a vehicle that depreciates quickly. If you paid a large down payment or bought used at a low loan-to-value, you may never be underwater and can skip it.
Can I get a refund if I cancel GAP early?
Usually yes. If you bought GAP as a one-time dealer fee and pay the loan off early or sell the car, you're typically owed a prorated refund of the unused portion. You have to request it in writing — dealers rarely refund it automatically.