Why buy GAP insurance & Extended Warranty?

Q: I’m in the process of purchasing a new car and I’m wondering if it’s worthwhile to sign up for GAP insurance and/or an extended auto warranty. Should I buy extra protection for my car?

A: Buying a new car is an important financial commitment. As you choose the make and model of your new set of wheels, you’ll also have to decide whether you want to purchase an add-on product designed to protect the investment you’ve made in that purchase. Such products may include Guaranteed Asset Protection (GAP) insurance and extended auto warranties. Let’s take a look at these products, how they work and why you may want to purchase them from your credit union.

 

What is Guaranteed Asset Protection (GAP) insurance?

GAP insurance is designed to bridge the financial gap between the actual cash value of your car and the remaining balance on your auto loan in the event of a total loss due to accidents or theft. Vehicles depreciate very quickly, which means that standard auto insurance settlements may not cover the full amount owed on the loan at the time of the event, leaving a deficiency balance. GAP insurance addresses this shortfall, ensuring you are not burdened with paying for a vehicle you no longer own.

 

How GAP insurance works

Suppose you own a car with a remaining auto loan balance of $15,000. If you were to get in an accident, you may receive a payout of just $10,000 from your insurance provider if that is the current value of the vehicle. Now you’re left with a balance of $5,000 on your auto loan for a car you no longer have.

This is where GAP insurance comes in. If you were to have a GAP policy in place at the time of the accident, the plan would cover the remaining balance on the loan, which would be $5,000 in this scenario. It ensures you’re no longer obligated to make payments on the remaining balance of your auto loan.

What is an extended auto warranty?

An extended auto warranty, or Mechanical Breakdown Protection (MBP), covers the cost of specific repairs after the manufacturer’s warranty expires. It serves as a financial safety net against unexpected mechanical failures, which can be both costly and inconvenient.

 

Why do I need extra protection for my vehicle?

GAP insurance and an extended warranty can offer you significant protection and a safeguard against unpredictable events, including:

• Accidents and total losses. In the unfortunate event of a severe accident resulting in a total loss, GAP insurance ensures that you are not left with a loan balance after the insurance settlement, alleviating potential financial strain during an already difficult time.
• Theft. Vehicle theft can be financially devastating, especially if the insurance payout does not cover the remaining loan balance. GAP insurance protects against this scenario.
• Mechanical failures. As vehicles age, the likelihood of mechanical issues increases. With the rising complexity of modern vehicles, repairs can be especially expensive. An extended warranty can mitigate these expenses, paying for the parts and labor related to covered repairs.
• Financial protection against depreciation. New vehicles can lose up to 20% of their value within the first year. If your car is totaled or stolen during this period, it’s very likely that the insurance payout might be less than the outstanding loan balance. GAP insurance covers this discrepancy, preventing out-of-pocket expenses.

Benefits of securing extra auto protection through your credit union

If you’d like to buy GAP insurance and/or an extended warranty, look first to Pinal County Federal Credit Union! There are several benefits to buying GAP insurance from your credit union, including:

1. Comprehensive coverage. Credit union-offered extended warranties provide extensive protection, covering a wide range of components and systems.
2. Flexible and affordable plans. Credit unions typically offer GAP insurance at competitive rates when compared to traditional lenders or dealerships. The cost can be paid upfront or financed into the loan, offering flexibility to members.
3. Additional member benefits. Many credit unions enhance their GAP insurance with added advantages. [At Pinal County Federal Credit Union, we offer XXX.]
4. Personalized service. With a focus on member satisfaction, credit unions provide tailored advice, helping members choose the coverage that best suits their individual needs and financial situations.
5. Transparency. Credit unions are known for their straightforward and honest communication, ensuring members fully understand the terms and benefits of the products they purchase.

Investing in GAP insurance and extended auto warranties can provide you with peace of mind and protection for your vehicle. To purchase these extra safeguards for your car, call, click or stop by Pinal County Federal Credit Union today.

 

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