A woman told a car salesman she doesn’t need gap insurance because she has God on her side. He was trying to give it to her for free, but she still wouldn’t take it. Did she do the right thing? Or did she make a huge mistake?
TikTok user Costa (@costacreatescardeals) is a car dealer who makes content about the car-buying process. In a video posted on June 11, Costa recounts a recent conversation he had with a buyer that deeply concerned him. “I had a customer yesterday that bought a vehicle from us, and she had a 14.8 [percent] rate on a vehicle with no money down, so she was immediately rolling into a negative equity loan,” he says. “And I told her, ‘Hey, you need to buy gap on this loan.’”
But this customer is one of many, Costa says, who enter the dealership instructed by family or friends to not purchase any additional products or services from the dealership. “‘I do not need GAP,’ she said, ‘My mom told me do not buy gap. Do not buy anything in this office,’ and I explained everything to her as to why she needed it. And she still did not want to take it,” Costa says. “And I was like, listen, I’ll even discount the price of my vehicle, to where you have it for free.”
According to Costa, the woman’s response was, “Listen, I do not need gap. I already have God on my side. And I trust him to where if anything happens. He would take care of me.” He replied, “I was like, ‘All right, don’t call me when the vehicle gets totaled out. God willing it doesn’t, and God is on your side.’ I tried to do the right thing.”
@costacreatescardeals When trying to do the right thing goes wrong!#dealershiplife #carsoftiktok #carsalesman #financemanager #fypage #salestips #gap #loan ♬ original sound – costacreatescardeals
What is gap insurance?
Costa notes the terms of his customer’s deal for a good reason. That’s because when you sign a finance agreement on an auto loan, you’re agreeing to pay the full amount of the loan plus interest—even if something happens to the vehicle before the loan is paid out. That’s where gap insurance comes in. According to CNN, “When you lease or finance a car that gets totaled (i.e., repairing it would cost more than what the car is worth) or stolen, gap insurance pays the difference between the car’s actual cash value (ACV) and what you still owe the lender.”
Pros
Gap insurance could be useful to a person in the position of Costa’s client, because she is likely going to be making payments for a long time due to her financial situation. “If your car gets totaled or stolen and your claim is approved, your insurance company issues a payout, typically to your lender or leasing company, under your gap coverage to cover the difference between your car’s actual cash value (ACV) and the balance of your loan or lease,” writes CNN. “If you have negative equity in your vehicle and you can’t afford to pay off the loan or lease in the event of a total loss, gap insurance can be a good idea.”
Cons
However, make sure to look at the fine print on your gap insurance policy. It might include a coverage limit that could leave you responsible for part of the balance anyway. As per CNN, it doesn’t cover deductibles, maintenance costs, late fees, or roll-over balances from another loan. “Additionally, if your initial claim payment covers the full outstanding balance of your loan or lease, your gap insurance won’t pay out,” the article states. You might end up paying extra fees if you purchase the coverage at the dealership, but in this case Costa was waiving the fee.
How to get it
Some people are like Costa’s customer and really don’t want to purchase gap coverage at the dealership. If that sounds like you, you may have another option available. And that is to add the coverage to your existing auto insurance policy. “However, some may impose certain eligibility requirements, like you must be the original owner of the car, gap coverage must be added when you add your new car to the policy or the car cannot be older than three years,” writes CNN.
Alternatives
If you still aren’t interested in gap insurance, there are a few alternatives. Those alternatives include new car replacement coverage, better car replacement coverage and loan/lease payoff coverage. Each of these options come with stipulations and may not work in every situation. CNBC reports that some of “these types of coverages replace your vehicle when it is totaled, but have strict mileage limits and other requirements. They also won’t necessarily be more cost-effective or useful than gap insurance.”
Update 3pm CT, July 1: Costa told the Daily Dot that he believes “Gap is the most important contract to get, especially with $0 down and an interest rate in the teens.”
“We do try to do the right thing at our dealership and give it at a discounted price,” Costa, who can be found on Instagram at @costacreatescardeals, said.
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