Gap insurance with Ford Options?

[pmoc09]

I was finally able to track down a cancelled order Grabber blue and chose Ford Options to finance the car. The dealership was pushing Gap insurance pretty hard. They kept mentioning that gap is included automatically when you lease the car. I ultimately declined it but not sure if I made the right decision. Any thoughts?

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[methorian]

GAP would cover the difference in what you'd owe Ford Credit and what your insurance would pay out if you were to total the car. It's value is up to you really.

You can generally also purchase GAP coverage from your insurance company as well, if you decided you did want it.

I have generally purchased it if I felt the car's value would diminish quickly. It's pretty cheap to me, and the peace of mind is nice, but everyone has various opinions here I'm sure.

 

[machefan]

I was finally able to track down a cancelled order Grabber blue and chose Ford Options to finance the car. The dealership was pushing Gap insurance pretty hard. They kept mentioning that gap is included automatically when you lease the car. I ultimately declined it but not sure if I made the right decision. Any thoughts?

I am by far no expert in this area, but since Ford options is not a traditional lease I do not know why GAP from the dealer would be needed. I am sure others who are in know can answer this better. Your regular insurance would cover you provided they include it etc.

 

[timbop]

I asked GEICO about it and they don't offer gap, so I will probably just take Ford's. The reason I'm doing options is that I'm worried about resale value down the road, so gap makes sense to me personally. As mentioned, if the value of the car is less than what you owe and you total the car you're on the hook for the difference.

If you're worried about it, you can probably get it after the fact from a company that specializes in that.

 

[Jako607]

Definitely take the Gap. I've talked about this extensively with my financial advisor. Ask your insurance company if they offer it first (some do, many don't). Mine didn't so I asked my dealer to add it. They didn't even try to sell me on it, I preemptively asked them for it. If you drive off the lot and get T-boned you'll be on the hook for the difference between what your insurance company will give you and what you owe Ford/bank. It's well worth it under a grand and spread out over a lease/Options terms it's only like $15-$20/mo. If you were buying a Bolt for 14k off MSRP you wouldn't need it but when paying MSRP it's a wise insurance policy to have.

 

[JellyBelly]

My insurance also does not offer gap coverage so planning to with Ford gap coverage if it’s not too expensive. If the car gets totaled in year two or three the difference in the gap will be likely much more than the insurance cost

 

[SONEWBE]

GAP insurance on a "Options" purchase would be driven by several factors. Such as:

1. Size of the down payment.....the larger the down the lower the risk. I believe the down can be up to 30% of the purchase price.
2. Type of insurance....if you have full replacement coverage the risk is lower (some insurance will actually cover the replacement value for a one year newer car.
3. Insurance deductible....the lower the deductible the lower the risk.
4. The value of any tax credits. In my case the actual cost of the car will be $10K below the selling price. This will have a impact on how much depreciation I will actually incur. It's anybodies guess on what the car value will be in 3 years.

Personally, I plan to use the 3 year Options plan with a 25% down payment. I get the benefit of limiting depreciation risk over a standard loan. The additional interest is reduced by the Options credit. Assuming I still want the car I'll just pay-off the balance at the end of the 3 year term.

I do not plan on buying a GAP policy.

 

[pmoc09]

FYI, getting GAP via your insurance provider ($5-$10 per month) maybe much cheaper than going through Ford. Progressive offers GAP.

 

[malba2366]

Probably don't need GAP because with the $7500 tax credit you get you won't be under water on the car.

 

[Woeo]

I was finally able to track down a cancelled order Grabber blue and chose Ford Options to finance the car. The dealership was pushing Gap insurance pretty hard. They kept mentioning that gap is included automatically when you lease the car. I ultimately declined it but not sure if I made the right decision. Any thoughts?

Consider your 'cost' if you self-insure.

If you are an average driver the prospect of you having an accident in any given year is about 5%.

So let us call it a cumulative 15% over the first three years off ownership, those years when you might likely owe more than the actual cash value of the car.

The prospect of a vehicle actually involved in an accident actually being declared a total loss [too expensive to repair] ranges from 5% in the first year rising to 10% in the third year. Lets call it 7.5%.

So the prospect of your making a claim under the gap insurance during the first three years is about 7.5% of 15% or 1.125%. An 88 to 1 long shot.

How much is at risk? What is the amount GAP is protecting your from?

Suppose your MME MSRP was 55,000. You put down 5,000 and borrowed 50,000. You received your $7,500 tax credit and applied it to the principal owed, so the balance is now 42,500. [You could game the system and keep the $7,500 in another pocket, leaving the loan balance at 50,000, setting up a scenario of potentially collecting $7500 a second time from the GAP insurer if you would ever make a claim.]

In either case Actual Cash Value will reflect the 7,500 tax credit and if we apply a typical 20% first year depreciation... the car is worth approx. 38,000 when you drive off the lot.

Your max risk would be about $4,500. Loan balance $42,500 minus ACV $38,000. [Even if you don't apply the tax credit to the loan balance, your max risk is still $4,500.]

The chances of a totaled accident during that first year? 5% of 5% or .25%

The true cost to insure that first year $4500 risk for the insurance company? ~$11.25. They could collect 400 premiums of $11.25 and pay out $4500 to the one accident that totaled the vehicle and break even.

In the second year the % of totaled vehicles rises, but the loan balance should be going down as well. Same thoughts for the third year. The at risk, GAP, amount will also be lowering with time as the loan balance should decrease faster than the car depreciates. In effect leaving us with a higher chance of a lower amount at risk as time marches on.

A three year gap policy true risk cost for the insurer is less than $35. [$90 if you don't pay down the loan with the tax credit.] Add in expenses and a fair profit would call for how large a premium?

Perhaps $100. [A bit more, if everyone wants to game the system and hope for a $12,000 pay out rather than $4,500.]

Anyone buying a MME should be capable of self-insuring a $4500 GAP risk....or they should reevaluate whether their purchase is financially sound.

Certainly they should not pay $1,000 or even $300 to avoid a .25% exposure to a $4,500 loss. [If you are now considering a financial scam make sure the vehicle is totaled.]

 

[shutterbug]

GAP insurance that the dealers sell is almost pure profit to the dealer. It's a scam to separate you and your money.Some insurance companies sell it as add-on to your auto policy, butr most do not. Because it's a scam.

 

[ChasingCoral]

GAP would cover the difference in what you'd owe Ford Credit and what your insurance would pay out if you were to total the car. It's value is up to you really.

You can generally also purchase GAP coverage from your insurance company as well, if you decided you did want it.

I have generally purchased it if I felt the car's value would diminish quickly. It's pretty cheap to me, and the peace of mind is nice, but everyone has various opinions here I'm sure.

That’s normally not something I buy but my wife liked the idea, so we went with it.

 

[KAustin]

It was only $4 more a month, so I took it.

 

[MachE2021]

I did Options and ended up buying Gap insurance, at least so long as my loan balance is higher than FMV. I plan on aggressively paying it off by the end of my 48 month period (essentially having $0 left when the balloon payment is due). Gap insurance for me via Esurance is only about $4/month, so I figured why not.

 

[MrRossKeys]

They didn't even try to sell me on it, I preemptively asked them for it. If you drive off the lot and get T-boned you'll be on the hook for the difference between what your insurance company will give you and what you owe Ford/bank.

This was my situation. I agree with others that GAP through your insurance may be cheaper, but GEICO doesn't offer it so I asked for it to be added to my Ford Options contract.

Also, I found out by accident that it can be discounted. In the process of negotiating costs for additional warranties etc the salesman somehow discounted the GAP and forgot to take it off when I declined the maintenance plan.

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