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Get the gap if you’re upside-down loan-wise!
Excerpted from an article written by Sylvia Booth Hubbard & Marie W. Brownell

Your son just totaled your sixteen-month-old leased car in an accident. You have full collision and comprehensive insurance coverage, so you’re fully protected and your insurance will replace your vehicle at no cost to you. Right? At least that is what you thought. The sad answer is …Probably not! Unless you have “gap” insurance - an insurance option on your auto policy that covers the “gap” between the actual value of your car at the time of the accident and the amount you still owe the finance company -- you could be out thousands of dollars. With all the great financing deals being offered by dealerships these days -- such as no money down and no payments for months -- could make you even more vulnerable. What’s more, the gap amount can be considerable.

“Even though gap insurance is important for people who buy cars, it is essential for those who lease,” says Mary Butler, senior editor of cars.com. “Gap insurance basically originated with leasing.” The upside-down nature of a typical lease is even more common than a purchase situation because the lessee usually has no trade-in and usually puts little or nothing down. Similar to a purchase, if the car is a total loss, you owe the difference between what you have paid and what you owe on the balance of the lease.

This year, my son did total my leased vehicle while I (Marie Brownell) was on vacation. My sixteen-month-old leased car would have cost me over $3000 to close out the lease! Luckily, I was familiar with “gap” insurance and made sure I had it on my vehicle. I paid $140 for two years of the insurance rider. I personally can attest that it’s a great value for everyone who finances or leases a car.

Gap insurance is only available for new cars that are being financed. You must be sure to add this coverage no later than 30 days after your lease or purchase of the new vehicle.