When gap insurance is worth it — and when it's a dealer profit line
Buy it when you put less than 20% down, financed longer than 60 months, or rolled negative equity from a trade. Skip it once loan-to-value drops below ~100–110%. The dealer's $500 version and your insurer's $30 endorsement cover the same risk — the only difference is the price and the interest you pay on financing the dealer's.
Related guides
Long-form playbooks on the same topic, written by the RevenueLab editorial team.
FAQ
How much does gap insurance cost?
Through your auto insurer as a loan/lease payoff endorsement: $20–40 per year. From a dealer: $400–700 as a lump sum usually rolled into the loan — where it also accrues interest. Same protection, 10–20× price difference.
Do I need gap insurance on a lease?
Usually yes — and most leases include or require it, since early-lease payoff balances almost always exceed market value. Check the lease agreement before buying it twice; it's often already in the payment.
When can I cancel gap insurance?
Once your loan balance drops to or below the car's market value — typically year 2–3 on a standard loan. Run the numbers (payoff quote vs KBB private-party value) and cancel; dealer policies often refund the unused portion pro-rata.
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