of course they keep your down payment.

Here is a scenario. Let's say, for the sake of argument, you bought the car for $40,000. You put $5,000 down, and end up taking out a loan for $35,000. You have been paying your car every month and have worked the principal to $30,000. You crash the car, and at the time you total it the car is worth:

1.) $28,000. You would normally be screwed because you owe more than the car is worth. If you have Gap insurance, this is where it kicks in. Gap insurance covers the $2,000 you are short. You walk away from the scenario with your loan paid off, and none of your money back. You pay the deductible.

2.) $35,000. Your car is worth more than what you owe. Your insurance pays off your lender for the $30,000 you still owe on the car. You keep the extra $5000 minus your deductible.


You can avoid this problem in the future by putting more down on your cars, and therefore financing less of the value of your car. You don't have to get GAP insurance if you always owe less than what the car is worth. It makes no sense to me to pay additional GAP insurance premiums that I could easily avoid by buying a car that is in my price range that I can put a decent sized deposit on. GAP insurance is a waste of money in my opinion that is only required when people take out a bigger loan then they should to pay for a car that is going to depreciate super fast.