Whether you’re a new or seasoned car buyer, you may have heard of the term gap insurance. You likely already know about the required collision and comprehensive automotive insurance, but gap insurance is an optional type of coverage that isn’t as widely known. Here at Sames Kia, our Kia finance center representatives are happy to demystify gap insurance and advise you on whether or not you should obtain it.
Gap insurance is an add-on type of insurance that covers the gap between what your vehicle is worth and what you still owe on it. Here’s a quick example of how gap insurance would play out.
Let’s say you purchase a new Kia car from Sames Kia for $30,000. The moment you drive a new car off our lot, its value drops, known as depreciation. If your vehicle becomes irreparable due to it being totaled or stolen, the insurance company will pay the replacement cost of the vehicle, say $22,000. This can be an issue if you took out an auto loan on the vehicle and still owe more than $22,000, say $24,000, to the lender. You would still owe the difference, $2,000 in this case.
This is where gap insurance would come into effect. Gap insurance covers the difference between what you owe on the car loan and the actual value of it. Thus, drivers who are in the early stages of a large loan should consider obtaining gap insurance, along with those who lease a new Kia car.
To learn more about gap insurance, get in touch with our Kia dealers serving Cotulla, TX today! We look forward to working with you soon.