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Why do I need a gap waiver?
I'm getting a new 2021 Ford Bronco. The dealership is offering me a gap waiver. The salesman said it's important to have on a new car, but why?
Emily Maracle · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
“When you purchase a new vehicle, it depreciates very quickly. On average, a brand new car can depreciate up to 20% in the first year and 10% each subsequent year.
For example, if you purchase your new car for $25,000, it may only be worth $20,000 after a year. However, the amount of your loan won’t decrease as quickly. This means you could owe more on your loan than your car is worth.
This is why a gap waiver, also known as
gap insurance
, is important. If your vehicle is a total loss, your gap waiver covers any difference between the balance of the loan and the actual cash value of your vehicle.While you may not always need gap insurance, it can be a beneficial coverage to have the first few years of ownership until you reach the break-even point between the loan balance and the value of the vehicle.
Remember that you don’t have to purchase a gap waiver directly from the dealer. In most cases, buying a policy from an insurance company is the cheaper route. Use the
Jerry
app to compare rates on insurance for your new car and quotes for gap insurance.”View full answer
- Gregory R.
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Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.
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