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What is gap insurance on a car loan for a Subaru?
Do I need gap insurance? I purchased a new Subaru in 2020. I have a loan for the car.
Sophie Newman · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
“When you purchase a vehicle, its value declines dramatically in the first few years of ownership.
If you get into an accident in these first few years, you could end up owing more on your car loan than the value of your vehicle.
That’s where
gap insurance
comes in. Gap insurance pays for the difference between the amount owed on your loan and the actual value of your vehicle, which is the amount you’ll get in a regular insurance payout. Gap insurance is worth the purchase if you have a substantial loan on your vehicle. Most vehicles depreciate up to 20% in their first year of ownership, meaning it’s likely you’ll owe more on your loan than the value of your vehicle.
As most lenders and dealerships require the purchase of gap insurance at the time of sale, you’ll likely need to look into it through your
car insurance company
.” View full answer
- Gregory R.
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