If you’re already aware or have read our feature on gap insurance, you can understand why folks are happy if they buy it and never have to use it. Don't be confused if you don't already know how important gap insurance can be--it affects new car leases in the following ways:
It lets shoppers put less money down. Having gap insurance enables lessees to get into vehicles with lower down payments, because it protects the leasing agent in case of a total loss. Down payments of 20 percent or less make gap insurance more critical, for that reason.
It protects all involved. Nobody wants a total loss to happen, but they still occur. Gap insurance affects your car lease by covering the concerns and costs for all involved. As most auto insurance policies are written, your carrier will pay market value for your car in this worst-case scenario. Note that market value does not take into consideration what you owe on the lease. Gap insurance covers that disparity, saving you the burden of covering the difference.
It's often mandatory. Most leases require gap insurance, whether it’s tacked on by the leasing company or obtained elsewhere. That’s an option consumers don’t always realize they have. Coverage can be obtained from some auto insurance companies or dedicated gap coverage vendors. Like anything, you’ll want to compare costs and coverage since both vary.
It often comes with limitations. Just as lease terms differ from car to car, gap insurance can affect your car lease from policy to policy. Look not only at what they provide, but pay close attention to what they don’t provide. Certain terms and conditions may have to be met to qualify for coverage. And in the event of a total loss, the protection afforded can differ. It’s always best to know upfront.