Tag Archives: GAP insurance

Trump throws military under car dealer bus

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What is “GAP” insurance, and why would the Trump Administration seek to allow car dealers to gouge our nation’s military heroes and their families when they buy cars, by selling them high-priced “GAP” insurance that is often worthless?

According to car dealers, the purpose of GAP, or “Guaranteed Asset Protection” insurance, is to cover you if your car is stolen or totaled before you pay off the loan. The “GAP” is the difference between the amount of the loan and the worth of the car.

Anyway, that’s the shtick. But in reality, the main purpose of “GAP” — when it is sold at car dealerships, and added into the price of a car loan — is to line the pockets of greedy car dealers.  You can actually get a much better deal if you simply buy GAP protection from your own insurance company. Regular insurers usually charge as little as $20 or $30 to add GAP coverage to your existing policy.

However, car dealers often charge $1,000 or more. Plus when it is added into your loan, it can cost you far more than that, in added interest that goes to the lender, for the entire life of the loan.  Making matters worse, some dealers pocket the money for GAP and never even activate the policies. So if your car is stolen or totaled, you could be in for a rude awakening. Some dealers have scammed many customers this way, then left the state and declared bankruptcy, evading any legal liability.

It’s bad enough when car dealers cheat civilians this way. But according to National Public Radio (NPR), as reported by VOX,

“the Trump administration has also proposed changes that could open up service members to predatory practices when they buy cars. The administration has proposed easing restrictions on “gap insurance,” an add-on to car insurance that covers the difference between the amount a car owner owes on the car and the car’s actual cash value.

Gap insurance is typically available from regular insurance companies for a very low price, as little as $20 to $30 a year, but car dealers often mark it up by hundreds of dollars. Current rules effectively block auto dealers from tacking on overpriced gap insurance to military service members, but the administration has sent a proposal to the Defense Department looking to revise the rules. (If the proposal does eventually make it out of the Defense Department, it will ultimately require the approval of the Office of Management and Budget, which [Trump appointee Mick] Mulvaney also heads.”

As Americans, we all have a stake in protecting our military Servicemembers from scams like this.  Among other reasons — when they are cheated in this way, it increases the risk they may lose their security clearance, and their ability to perform their vitally important mission, of protecting our nation from enemies foreign and domestic.

Especially at a time when our nation faces unprecedented threats from enemies abroad and cyber-attacks from enemies who have penetrated our power grid and are messing with our elections, we cannot afford to lose the services of highly-trained military personnel, who are desperately needed to protect our nation.

Our nation’s military should not have to fight on this front, simply to preserve the protections they already have. They deserve a Commander in Chief who has their back, not one who is stabbing them in the back.

This is an update of a prior post, “Avoid GAP insurance rip-offs”

 

 

 

Avoid GAP insurance rip-offs

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If you’re buying a car from a dealership, resist high-pressure tactics aimed at getting you to buy “GAP” insurance. What the finance manager doesn’t tell you is that auto dealers make a lot of profits from the sales of GAP, or “Guaranteed Asset Protection” policies.

Dealers hike up the price, and add it onto your loan, where it can cost you $1000 or more extra, over the life of the loan. Some charge double or triple what you would pay if you bought GAP separately from a reputable insurance company. Finance managers are usually paid an extra bonus based on how many GAP products they sell. So they have a personal financial incentive to pressure you.

The purpose of GAP is to cover you if your car is stolen or totaled before you pay off the loan. The “GAP” is between the amount of the loan and the worth of the car. If there’s a large difference, it’s a sign you’re paying too much for the car.

It’s better to get a less expensive car, or wait until you can pay more of a down-payment and get a shorter loan, or pay cash, instead of paying extra for GAP.

If you do decide you want GAP coverage, shop around and avoid buying it at the dealership. Why?

One major pitfall to buying GAP at dealerships: many dealers collect the GAP payment, but pocket it themselves, and fail to activate the policy. Some dealers have been arrested and prosecuted for this scam, but even then, their victims were not able to recover their losses.

As a result, consumers who paid for GAP, and believed they were protected, got a rude awakening when their car was stolen, or totaled. When they contacted the insurer that was supposed to pay their claim, they found out they weren’t covered. Suddenly they had no car, and still had to pay thousands extra for the difference between the amount of the loan and what they collected from their auto insurer.

Another problem with buying “GAP” from dealers — often, the policies they sell have loopholes that exclude coverage, in the fine print. So consumers end up paying extra for worthless GAP policies that leave them unprotected.

Bottom line: either don’t buy GAP, or get your own coverage directly from a reputable insurer. Many offer GAP polices, and it pays to shop around.