Your brand new vehicle has depreciated in value significantly since the moment you drove it off the lot. In the event of an accident you are covered, but Gap coverage in your vehicle service contract covers that depreciation.
Many insurance companies offer Gap coverage or something similar to this for drivers who just purchased or leased a vehicle. This type of vehicle service contract is designed to cover the depreciated value of a vehicle in the instance of an accident.
How Gap Coverage Works
For instance, you just purchased a 2012 sedan for $25,000 that you only put a $500 down payment on. It has been just under one month of ownership, and you haven’t even made your first payment. According to the stigma, that sedan has depreciated significantly in value already.
You have now just gotten in to an accident and you aren’t worried because your vehicle service contract covers this. The insurance company just declared your vehicle is totaled, so you expect to get back the amount the BRAND NEW vehicle is worth. However, according to the N.A.D.A. that vehicle is only worth $20,000 since you have been driving it.
You have now lost $5,000 on your new car from the accident that you have to pay to the lender, $500 from the down payment, and factor in your deductible which could be $500-$1000 or more. This is where Gap coverage comes in as part of your vehicle service contract. Continental Warranty Inc. will cover that loss on the new vehicle with its Gap plan.
Insurance can be tricky, and you do not want to end up losing thousands of dollars because of loopholes. To learn more about Gap coverage please call Continental Warranty Inc. at 302-375-0401 or visit http://www.continentalwarranty.org/contact-us/.