[golferboy2312]

Hi all,

I am in the US, not sure how this question applies to those outside the US. When leasing or purchasing a car, there is insurance called Gap insurance that you can get. In a nutshell, if your car is totaled in an accident, it will pay the difference between the value of your car at that time and what you still owe on the loan (or lease). For example, you buy a new BMW for $70k, one year later you have an accident and the insurance company says it is totaled, and hands you a check for $48k, but you still owe $55k on the loan. Gap insurance pays you the $7k difference.

I think cars are currently depreciating faster during this pandemic (I don't have data on that, but it SEEMS to be the case), and that may continue for years after because of a global recession.

My question is, do you think Gap insurance is a better deal now? Is this protection worth it? If there is anyone out there that has it, what sort of price are you paying for it?

[Burrcold]

I'm in Canada, but same idea here as well. I purchased GAP insurance on the M340i and I did as well on my previous 2019 Audi S5 Sportback (thankfully)! It was totaled with less than a thousand miles on it, and they wanted to pay me the depreciated value on it which was almost $12k less for basically driving it off the lot. Crazy. Anyways, I did end up settling with them for the full amount, but it was nice knowing that had they not settled I would have had the safety net of GAP. I paid $1,200 or something like that?

[todd92]

Insurance is NEVER a good deal.

[TTG]

If you are leasing, it is part of the lease agreement that BMW covers.

For financing, I would definitely have it as part of my policy and I believe some states do require it.

[Burrcold]

Originally Posted by todd92

Insurance is NEVER a good deal.

In this case it is...

[frankenm]

This is just insurance for your loan

Pay your loan off early (e.g. refinance, payoff) and you can actually get a portion back based on how long you have had it ... this is where it makes it worth it if you plan on having this for peace of mind and still not lose out too much money.

It is a good deal if you use it or take advantage of it ... otherwise it is a waste of money.

[Burrcold]

Originally Posted by frankenm

This is just insurance for your loan

Pay your loan off early (e.g. refinance, payoff) and you can actually get a portion back based on how long you have had it ... this is where it makes it worth it if you plan on having this for peace of mind and still not lose out too much money.

It is a good deal if you use it or take advantage of it ... otherwise it is a waste of money.

Every insurance plan is a "waste of money" if you don't have to take advantage of it. But it REALLY sucks if something happens and you don't have it. You're paying for peace of mind.

[youngdoc1]

Wait isn't GAP insurance included with all BMW canada leases?

[Burrcold]

Originally Posted by youngdoc1

Wait isn't GAP insurance included with all BMW canada leases?

In Canada yes (not financing). I don't know about the US.

[youngdoc1]

Ah ok thanks for clarifying. Speaking of insurance, this is my 2nd bmw lease. I made the decision to buy tire/rim warranty - had 4 flats changed in the span of the first year, making it well worth it.

As with any insurance the company will make more money than they pay out, but the convenience and peace of mind was worth it for me.

On the topic of gap insurance, my care insurance company also sells a rider where 1) if your car is totalled within the first 5 years they pay out the full value of the car from the day you bought it, and 2) if repairs are needed, all parts are replaced with new OEM parts.

[chassis]

Is the protection worth it? No. All insurance is designed to benefit the issuer, most of the time. This means the odds are against you, that you will come out ahead, financially. This it how it is.

Insurance, when not mandated by law, is primarily sold on a fear motivation. Items sold on fear are generally not in your financial best interest.

Cars are depreciating no faster today than they did in the past. Today, car finance companies are setting residual values higher than market, so that monthly lease rates are attractive. Finance companies are in business to sell leases, so the terms are engineered to do just that, sell leases.

The finance company has accounted for the higher-than-market residual in the overall lease package.

All of the commentary above is standard practice for all new vehicle finance companies.

[Red Bread]

Originally Posted by chassis

Is the protection worth it? No. All insurance is designed to benefit the issuer, most of the time. This means the odds are against you, that you will come out ahead, financially. This it how it is.

Insurance, when not mandated by law, is primarily sold on a fear motivation. Items sold on fear are generally not in your financial best interest.

Cars are depreciating no faster today than they did in the past. Today, car finance companies are setting residual values higher than market, so that monthly lease rates are attractive. Finance companies are in business to sell leases, so the terms are engineered to do just that, sell leases.

The finance company has accounted for the higher-than-market residual in the overall lease package.

All of the commentary above is standard practice for all new vehicle finance companies.

Our F30 lease had a buyout of $33.5k at the end of the lease. Blackbook was $17.8k. So GAP insurance was almost comically worthwhile during the time that we owned that car. Sedans are depreciating at an amusingly high rate over the last five years, to say otherwise is absurd.

[zx10guy]

Originally Posted by youngdoc1

Ah ok thanks for clarifying. Speaking of insurance, this is my 2nd bmw lease. I made the decision to buy tire/rim warranty - had 4 flats changed in the span of the first year, making it well worth it.

As with any insurance the company will make more money than they pay out, but the convenience and peace of mind was worth it for me.

On the topic of gap insurance, my care insurance company also sells a rider where 1) if your car is totalled within the first 5 years they pay out the full value of the car from the day you bought it, and 2) if repairs are needed, all parts are replaced with new OEM parts.

I don't have any first hand experience with how things work in Canada. But in the US with my own personal experience, if you find a reputable body shop, you won't need to have an extra rider to get OEM parts if you need to file a claim. I have a body shop I work with that has always come through for me in getting OEM parts covered.

[happyjack]

it's probably worthwhile if you're the kind of buyer who doesnt want to put down any money at purchase and know that you're going to want a new car in 2-3 years.

i've never purchased gap insurance because (a) i usually put down 20-25% with cash or trade-in on purchase -- at the very least i'm paying all taxes, tags, title and fees plus 10%, and (b) i tend to buy used / off-lease / CPO vehicles that have taken the first big depreciation hit, and (c) i tend to keep my cars 5-6 years and ride out the rest of the major depreciation.

[Conissah]

I grabbed it on my M2C. Put 0 down and have a relatively low interest rate, but depreciation is still a thing. Now with this Corona thing, the car market has dropped even more. Meaning the car I financed for 58k, would sell/be valued at low high 40s to low 50s. I owe more than that on it, so if I were to get into an accident and total the car, I don't come out of pocket for it. Seemed like a smart choice for me at the time, and even smarter now given the current market. It barely raised my monthly payment, so I went with it.

[golferboy2312]

I called my BMW dealer yesterday and spoke with the finance guy. He said I had to buy it at the point of sale, I cannot buy it now. He said it most likely would have raised my payment by about $15/mo.

I typically don't buy this kind of thing, which is why I said no last year when I bought, but I am thinking it might not be bad now with the way depreciation may be accelerating...

[MurrayB]

Gap coverage is included in the US BMWFS lease. My first lease for a BMW was in 1990 through a bank BMWFS did not exist. I bought a separate Gap policy shortly after I took delivery when I learned about the liability and existence of Gap coverage.

[nioh_lbbm2]

Originally Posted by golferboy2312

I called my BMW dealer yesterday and spoke with the finance guy. He said I had to buy it at the point of sale, I cannot buy it now. He said it most likely would have raised my payment by about $15/mo.

I typically don't buy this kind of thing, which is why I said no last year when I bought, but I am thinking it might not be bad now with the way depreciation may be accelerating...

never get GAP from BMWFS or any financial institution. It's almost always cheaper through your auto insurance. Mine is about $40/year. So cheap for peace of mind.

[golferboy2312]

Originally Posted by nioh_lbbm2

never get GAP from BMWFS or any financial institution. It's almost always cheaper through your auto insurance. Mine is about $40/year. So cheap for peace of mind.

I have State Farm, unfortunately they don't offer it.

[nioh_lbbm2]

Originally Posted by golferboy2312

I have State Farm, unfortunately they don't offer it.

ah. They might be the only one that doesn't offer it. That's unfortunate.

[robertm]

I struggled with what to do when I bought the car. I paid cash, so no loan upside down stuff but still want my car to be mostly covered if stolen or totaled. When discussing with the insurance company how they would value for complete loss they gave the standard 3 similar cars in your area yada yada. Problem is there likely aren’t 3 cars similar to mine in the state with the number of factory (port) installed options. Compound with a huge amount of after sale upgrades and it’s a losing proposition. The port installed options are an excellent choice in that they show up on the window sticker. I have that as a tool to negotiate with if the worst ever happens. I also added a $10k rider for aftermarket parts in the event of total loss. Together that should get me most of the way back into a similar used M2C if the worst should ever happen.

Plan for the worst, hope for the best, pray none of it comes to fruition.

[Mingwan]

Oh, I thought gap insurance was for when you get gapped by another car in a street race