Why GAP Insurance Should Not be Purchased From the Car Dealer
You found a great deal for a practical car online. You visit the dealership and the salesman is enthused to give you the keys for a test drive. You indicate your interest in purchasing the vehicle and financing a portion of the sales price. Suddenly the salesman walks into the “back room” to talk it over with his “manager.” You start working on a credit application and realize the salesman has not broken down the applicable or optional fees for you. Then you learn that he has run your credit with five different lenders without prior authorization, and each hard pull is bringing your credit score down. You try to negotiate the interest rate and are told, “That’s not how it’s done here,” or “You are getting a good deal.” Three hours go by and you are not expecting any more surprises. Then the finance manager presents the installment contract to you, and you see multiple undisclosed fees: processing fee, dealer’s fee, title fee, document fee, GAP insurance, window etching fee, finder’s fee, and the list goes on. You learn that the true price of the car is two to four thousand dollars over sticker price. Do you have to agree to the contract terms? What happens if a dealer refuses to negotiate over the price or some of the optional items? What if the GAP insurance policy you paid for was never completed on your behalf?
GAP insurance
There are a few reasons why GAP insurance should not be purchased from the car dealer. Unfortunately, many potential buyers are so overwhelmed, excited, or simply worn down by the car buying process that by the time the contract is presented to them ready to be signed, they do not take the time to read over the fine details. Even worse, some dealers unscrupulously gloss over important points, try to sell warranties that cover little to no repairs, or rush the buyer through the signing process. Some dealers even try to charge the buyer for copies of the executed document. Worst of all, many buyers are tricked into buying GAP (guaranteed asset protection) insurance from the dealer at a price that is often five times higher than GAP insurance from a car insurance provider. The dealer will talk about how it is necessary but does not identify who the insurer is, what it would cover, or why it is so important, even though this additional insurance is rolled into the final payment and will garner interest if any portion of the purchase is financed.
GAP insurance is supposed to kick in when a driver totals the car after primary car insurance declares the vehicle a total loss. The GAP insurance is designed to cover the difference between the declared cash value for the car in its current condition and the value paid for the car at the time. For example, let’s say you buy a 2020 Jeep Cherokee for $26,000, the Kelley Blue Book value. You make a $6,000 down payment. Adjusted for fees and finance charges, the total price is $29,899. You drive it off the lot and it is totaled in a serious accident a week later. Your car insurance company values the car at $21,000, even though you just bought it for $26,000. So now you have an “upside-down” loan because you owe more on the loan that the car is worth. GAP insurance covers the difference between what your insurance company values and the actual price you paid. So in this example, it would cover the other $8,899. Unfortunately, some dealers collect the fees for GAP insurance and never apply for the coverage on behalf of the buyer. Then, when the car owner attempts to collect on the policy they have been paying into, the GAP insurance adjuster informs the owner that the policy does not exist. This means the dealer swindled the buyer into paying for coverage they do not even have.
Call Rocky Mountain Personal Injury Center Today
If you purchased GAP insurance, have written proof, attempted to collect on the policy and were told it does not exist, then you need to contact an attorney as soon as possible. Our attorneys at Rocky Mountain Personal Injury Center only handle plaintiffs’ claims, and we are not afraid to aggressively pursue shady car dealerships for the money they rightfully owe our clients. If you paid for optional coverage, it should be honored. Similarly, if you want to cancel GAP coverage, most policies allow you to do so within a specific time period or after you have paid off a majority of the installment loan. If you have questions about your GAP contract, installment sales contract, or any legal aspect of the car buying process contact our attorneys at Rocky Mountain Personal Injury Center to schedule a consultation.
