GAP insurance on a lease?

[Matt Meiser]

Yes? No? I'm leasing for the first time in 20 years (man that makes me sound old!) and I know when I go to sign papers they are going to push GAP insurance. My insurance company doesn't offer it on leases, only purchases which tells me its probably not necessary?

[Frederick Skelly]

Matt,
I'm sorry to sound foolish but I'm not following you - what's GAP insurance? I don't recognize the term. Also, are you leasing a car or something else?
Fred

[Brian Tymchak]

Had to Google that one up myself:

From a large insurers website: Gap insurance is an optional insurance coverage for newer cars that can be added to your collision insurance policy. It may pay the difference between the balance of a lease or loan due on a vehicle and what your insurance company pays if the car is considered a covered total loss.

[Jerome Stanek]

Can't you just get total replacement auto insurance.

[Matt Meiser]

Our insurance company (Farm Bureau who has an excellent reputation here in Michigan) doesn't offer it on leases, only purchases.

It seems to be a new phenomenon but the last car I purchased and the one my mom just got they pushed it pretty hard.

[Jim Becker]

GAP insurance is a good idea and shouldn't be very expensive, regardless of the source. However, the dealer may try for a nice "markup". Negotiate hard.... And for your lease, you want zero down outside of any required tax/tags, etc. Any other down payment is just an advance on the payments for the capital cost of the vehicle less residual. The numbers really matter... ...but I'm sure you know that.

BTW, when I Google GAP insurance, there appears to be independent providers of the same. You may want to poke around so you have some numbers before arriving at the dealer to finalize your transaction.

[Kev Williams]

For the life of me I have no idea why a leased vehicle is any different than a bought vehicle where insurance is concerned. You make your payments, drive the thing, and need insurance if you drive it into a tree... What does it matter who's collecting the payments?

That said-- Farm Bureau doesn't offer 'full replacement' coverage? If not, I'd look elsewhere for insurance.

[Rich Riddle]

That said-- Farm Bureau doesn't offer 'full replacement' coverage? If not, I'd look elsewhere for insurance.

I have the same sentiments. I would not pay extra to the leasing establishment to obtain coverage the automobile insurance company should cover. Anyone having two sources of insurance knows the pain that occurs if you are double covered and one is the "A" plan and one is the supplemental plan. We have USAA and it offers full coverage. That said you must be eligible through the military to qualify for USAA insurance.

[Jim Becker]

A lot of insurance companies don't offer full replacement cost coverage for auto insurance. So one may find it desirable to have GAP insurance when leasing (or financing with minimal down payment) to insure that they are not on the hook for a pile of shekels if the vehicle is "totaled" and has an actual cash value that's less than would be owed to pay off the obligation. Some folks are not comfortable self-insuring for that risk. And sometimes switching insurance carriers is a bit more complicated because of other related policies or situations. Many leasing companies are more sensitive to this than regular loan lenders; some may even insist on GAP coverage, depending on circumstances.

[Mike Cutler]

For the life of me I have no idea why a leased vehicle is any different than a bought vehicle where insurance is concerned. You make your payments, drive the thing, and need insurance if you drive it into a tree... What does it matter who's collecting the payments?

That said-- Farm Bureau doesn't offer 'full replacement' coverage? If not, I'd look elsewhere for insurance.

They will pay, up too 100% of the current NADA Blue Book retail value of the vehicle. If you are reversed on your car loan, i.e. you owe $15,000 and the car is only worth a max of $12,000, you have a 3,000 dollar "gap". Cars depreciate much faster than the loan pays off, if there is little, or no money down.
I'm not defending the insurance companies, but if they were to pay 100% of what a person owes on a car loan, instead= of what it is worth, the fraud would be incredible.

Matt
Read some Internet articles on leasing. It's not as easy as just having a lower monthly payment.
Jim is 100% correct, any money down at the time of the lease is money "given away", and defeats the purpose of leasing in my opinion. Gap insurance is very common on leased vehicles. It doesn't mean you have to obtain to from the dealership.
I used to lease cars as a matter of preference.( I don't any longer) There are really good lease term, and there are really bad lease terms. Just like buying the car would be.

[Rich Engelhardt]

Jim is 100% correct, any money down at the time of the lease is money "given away", and defeats the purpose of leasing in my opinion.

Mostly true....
Sharpen up your pencil and remember to take your calculator along when you go to look at a car.
$10 a month will buy you roughly $350 worth of "vehicle" over a 36 month lease.
My lease payment w/no money down came to about $420 a month. W/$3000 down, the monthly payment dropped to $350 a month.
I gave them another $3000 down which dropped the payment down to $330.00 a month.

Poor math? Bad deal? Possibly. However, the car I leased ( a loaded RAV4 Limited) is a gorgeous to die for vehicle (IMHO). It's by far the nicest thing I've ever driven.
W/the open end lease, I will be able to buy it at the end of the lease if I want. In that case, the extra money down will be worth it.
If not, well, I lose - - but - - only to a certain point.
For reasons I'd rather not go into because of the complexity, right now, cash flow is far more critical to me than "saving money".
(and please - - don't ask me to justify that - I can't because it's so complex)


Re Gap insurance - - go over the plan with a fine toothed comb.
They wanted $1400 for it when I leased the Rav4. When I asked if I could think it over, the price dropped to $1100 real quick. I have a feeling it would have kept going down if I'd have pushed it .
Anyhow - it not only covers the difference between the book value and whatever, it also covers any damage there may be on the vehicle, 100% w/no deductible, when I turn it back in.

W/$500 deductible, and the cost of even a minor repair job, that $1100 shrinks real quick.

For the life of me I have no idea why a leased vehicle is any different than a bought vehicle where insurance is concerned. You make your payments, drive the thing, and need insurance if you drive it into a tree... What does it matter who's collecting the payments?

Simple - - you don't own the vehicle. All you "own" is depreciated value.
A vehicle lease is the ultimate unsecured loan because you have zero invested in a multi-thousand dollar item.

[Kev Williams]

Simple - - you don't own the vehicle. All you "own" is depreciated value.
A vehicle lease is the ultimate unsecured loan because you have zero invested in a multi-thousand dollar item.

Actually, you do have more than 'zero' invested: Your Name and credit history...

If you take out a loan to buy a car, you don't own that car any more than the one you leased. Fail to pay and it's the banks car. And and a leased car has your name on the title just like the 'bought' car. (all mine have anyway)

I agree with Mike that paying off what the car's worth isn't the same as paying off the loan. One of my kids is a good example of this, as he just rolled over $8000 of negative equity on his trade in into the loan for his new (used) car. So the new car loan is already severely upside down before it leaves the lot. (yes, we TRIED to talk him out of this)... An insurance company can't be expected to pay off HIS loan even if he drives it into a tree on his way home.

However, a lease payoff is always exactly deducted each month, and and any insurance company SHOULD be able to offer insurance to cover the cost of paying off the lease (or actual replacement cost, whichever is higher) since they'll know to the penny what the payoff amount will be any given month. For no-down payment leases, a $1000 or $1500 deductible would help keep honest people honest when considering totaling a car to get out from under it, less or no deductible based on down payments made.

and really, how does one total a car while not also incurring bodily injury and having it NOT look like fraud? Tall order!

My whole point is simply: It should not take 2 insurance policies to insure 1 vehicle...

[Rich Engelhardt]

With a lease in Ohio, your name isn't on the title. At least mine isn't. Toyota Financial is listed on the registration and I suppose the title. I have no reason to see the title since I don't get plates for the RAV4, Toyota does.

LOL! A third party can't spend your good name or credit history.....

Back when leasing was first starting to grow (1980's), you had to have outstanding credit in order to lease anything.
It was extremely difficult to lease a vehicle since so few had the credit rating to do so.
I asked why and the answer I was given was the "unsecured loan" I mentioned above.

And and a leased car has your name on the title just like the 'bought' car. (all mine have anyway)

Probably a different way it's handled in different states.