If you get in a car accident with your new vehicle, you may find that you owe thousands of dollars after your current insurance has totaled out your vehicle. Gap insurance can help cover these costs, but how much are you willing to pay?
The price of your gap insurance depends on the company you choose. Dealers are some of the most expensive options with the price being between $500-$700 added to your loan, but this isn't the only price you'll pay. You'll also end up paying interest on this money if it's added to your car loan. Thankfully, there are cheaper alternative options available. Federal credit unions allow you to get gap insurance for around $250 to $300 in addition to your loan. Because it’s added to your loan, you’ll have to pay interest on your gap coverage.
The final option is to get gap insurance through your auto insurance. To get it through your auto insurance, the cost is around $20 per year. More importantly, you’re not going to pay interest on your gap insurance. It’s obvious that getting it through your auto insurance seems like the best deal, but be sure to read the terms of each offer to know which option is truly best for you.
*All facts and figures from NerdWallet.
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