Should I get GAP insurance for a used car?

GAP insurance for a used car is less than normal, but it may be worth it in certain cases.

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Rachel Bodine graduated from college with a BA in English. She has since worked as a Feature Writer in the insurance industry and gained a deep knowledge of state and countrywide insurance laws and rates. Her research and writing focus on helping readers understand their insurance coverage and how to find savings. Her expert advice on insurance has been featured on sites like PhotoEnforced, All...

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Written by Rachel Bodine
Feature Writer Rachel Bodine

Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years (BBB A+). He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like and Safeco. He reviews content, ensuring that ex...

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent Daniel Walker

UPDATED: May 16, 2022

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Things to remember...

  • GAP insurance reimburses you in a total loss when you owe more on your loan than your car is worth
  • GAP insurance is most useful on longer-term loans or when there was no down payment
  • You can get GAP insurance on a used car through the car dealership or your car insurance company

Guaranteed asset protection, or GAP, insurance is extra protection for your vehicle in case you have an accident that leaves the vehicle as a total loss.

If you carry collision and comprehensive insurance, which is typically a requirement for any financed vehicle, then your insurer will pay out the value of the vehicle if it’s a total loss. 

But what if the vehicle is worth less than what you owe at the time of the accident? This can happen whether you bought the car new or used, and it’s where GAP insurance comes in.

Ready to compare major insurance companies that offer GAP insurance? Enter your ZIP code into our free quote comparison tool to find affordable GAP insurance.

When to Consider GAP Insurance for a Used Car

When you buy a new car, GAP insurance is typically recommended. That’s because when you buy a new car, it ceases to be new as soon as you drive it off the car lot. 

A new vehicle’s value typically depreciates by 15-25% the first year, and much of that happens right when you drive it off the lot. Unless you put down more than 25%, your loan balance could almost immediately be greater than the vehicle’s value. 

With used cars, though, there is more to consider.

Age of the Vehicle

The rate of depreciation tends to be lower in each year of a car’s life. This means that if you buy a six-year-old car with a loan, it may not be worth adding GAP insurance as your loan balance will generally keep up with the depreciation rate.

For older vehicles, the amount you pay for GAP insurance is likely to outweigh the difference between the vehicle value and the amount remaining on the loan if you were to experience a total loss accident. 

For cars three years old or newer, though, GAP insurance may be a wise investment.

Length of Loan Term

Another determining factor is the length of your car loan. If you purchase a vehicle that is less than three years old with a loan term greater than 60 months, then GAP insurance could be a wise investment. 

This is because a longer-term loan means you are making lower payments each month, which often results in your vehicle’s value depreciating faster than you are reducing your loan balance.

Smaller Down Payment

A down payment reduces the amount of your loan in relation to your vehicle’s value. If you put a lot down, it reduces your need for GAP insurance on a used car. 

However, if your down payment is less than 20% and the vehicle isn’t very old, GAP insurance could still be useful. The lower the down payment, the more useful GAP insurance could be for you.

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Why is GAP insurance important?

If your car is deemed a total loss in an accident, your full coverage insurance policy will typically pay out the value of the vehicle. 

When you have a loan, this payout goes to the lender first. However, if the value of the vehicle is less than your loan balance, you’ll owe the difference. But with GAP insurance, this amount will be covered so you don’t have to pay out of pocket.

Here is a scenario:

  • Imagine your vehicle is totaled and you still have $8,000 left on your loan. 
  • Your insurance company values your car at $6,800, so that’s the maximum amount it will pay your lender. 
  • That still leaves you with $1,200 remaining on your loan balance.

If you have GAP insurance, that $1,200 will be taken care of by your insurer.

How can I get GAP insurance on a used car?

When you buy a new or used car, the dealership is likely to offer you GAP insurance. This can be built into your financing terms and is the simplest way to add GAP coverage on a used car.

However, buying GAP insurance through your dealership is often more expensive than what you could get through a regular insurance company.

Many car insurance companies, such as Allstate and Nationwide, offer GAP insurance. You may also be able to add GAP insurance right onto your current car insurance policy. If not, you may want to shop around for insurance companies that do offer GAP coverage.

GAP Insurance Adds Peace of Mind Under the Right Circumstances

Having GAP coverage on a used car may be helpful under the right conditions. GAP coverage is worth considering if your vehicle is three years old or newer, your loan term is more than 60 months, and/or your down payment is less than 20%.

If you meet these criteria, it’s worth weighing your options for adding GAP insurance to your used car.

As you know, comparing auto GAP insurance online is worth it. Compare GAP insurance rates right now by entering your ZIP code into our free auto insurance rates tool.

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