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Gap Insurance: Protecting You From the Unexpected Drop in Vehicle Value

September 30, 2025

You just drove off the lot in your brand-new car. It smells great, looks sharp, and feels like an upgrade in every way. But here’s the reality—your vehicle’s value starts to depreciate the second you turn the key and head home.

Why Depreciation Matters

It’s true what people say: the moment your car leaves the dealership, it’s no longer “new.” That means if you tried to sell it right away, you’d likely get less than what you just paid. This depreciation can become a big issue if your vehicle is stolen or totaled in an accident. Most drivers assume “full coverage” takes care of everything. But standard auto insurance only pays the actual cash value of your vehicle at the time of loss—replacement cost minus depreciation. If you owe more on your loan or lease than your car is worth, you’re responsible for covering the difference.

How Gap Insurance Works

That’s where gap insurance comes in. Example:
  • You owe $15,000 on your car loan.
  • Your vehicle’s current value is $10,000.
  • After a total loss, your standard insurance pays $10,000 (minus deductible).
  • You’re still left with a $5,000 balance.
With gap insurance, that $5,000 difference is covered. Instead of paying out of pocket for a car you no longer have, gap insurance helps bridge the financial gap.

Who Should Consider Gap Insurance?

Gap coverage is especially valuable for:
  • Drivers who financed or leased with little or no down payment.
  • Anyone with a long-term loan (70–84 months), where you may owe more than your car is worth for several years.
  • Those early in a loan or lease when depreciation outpaces what’s being paid down.
To add gap insurance, your vehicle must already have comprehensive and collision coverage. The best time to purchase it is soon after financing or leasing, when the loan balance is at its highest compared to your car’s value.

Take the Guesswork Out of It

Still unsure if gap insurance is right for you? Use our free “Know What You Owe” tracker to compare your loan balance with your car’s current value. In just a few minutes, you’ll know if you’re financially at risk—and whether gap insurance makes sense for you.

Final Word

Your car’s value will always drop faster than your loan balance—at least in the beginning. Gap insurance gives you peace of mind, making sure you’re not left paying for a vehicle you no longer own. Ready to explore gap insurance? Reach out to Griffin-Lantz Insurance today. As your local independent agents here in Columbus, we’ll walk you through your options and help you protect what matters most.