Bought a minivan with GAP Insurance

[FoolFromAZ]

The positive: Honda tend to hold its value. So when you resell this Van in few years it might get more money out of it. But I wouldn't extend it to 7 years. Also, I personally would never buy GAP or Extended Warranty insurance. That's a complete waste of money IMO. Unless you have a history of getting into accidents or buying American made cars (sorry no offense). Then I would consider it.

Extended warranty - I dont want any $1000+ bill after 4 or 5 yrs. I spent about 6k on my old camry in the last 6 yrs. thot $700 for extended warranty is not a bad idea.

GAP Insurance - I am not going to pay off this car loan atleast till I pay off my cc debt ( atleast 3 to 4 yrs). Also the new car depreciates faster in the first 2 to 3 yrs and If the van gets totalled, I dont want to get in to the situate where I get 18K from insurance and I owe 24k to the bank.

[disneysteve]

Most people who buy new cars use the repairs on their previous cars to justify the purchase.

I spent about 6k on my old camry in the last 6 yrs.

OP, I think you just reinforced noppenbd's point. Spending $6,000 over 6 years is a tremendous bargain compared to buying a brand new vehicle for perhaps $25,000 that would still require periodic maintenance and repairs and have higher insurance costs. My car is 11 years old and I'm quite happy if it costs me $1,000 or so per year. I know it will cost me a lot more if I replace it with something newer.

[FoolFromAZ]

I agree with you on the extended warranty, but not sure I agree about the gap coverage. If a brand new car gets totaled, you could collect thousands less than you owe. Unless you are prepared to make up the difference out of pocket, the insurance is probably a good idea.

if it gets totalled in the first yrs, i wud get around 20k
17k in the second yr, 15k in the third year (kbb value of oddysey lx).

if the loan is for 5 yrs term,

then amount I would owe after 1st yr: 21,961.47 ( 2 k from GAP)
after 2nd yr : 17,070.61 (no use of GAP)
after 3rd yr : 11,800.06 (no use of GAP)

if the loan is for 7 yrs term,

then amount I would owe after 1st yr: 23,508.54 (3.5K from GAP)
after 2nd yr : 20,284.84 (3.2k from GAP)
after 3rd yr : 16,810.88 (1.8k from GAP)

I will get more benefit from GAP only if the loan term is longer. anyway i am not going to pay off my auto loan in the next 3 yrs.

[disneysteve]

So on the 5-year loan, the gap insurance only comes into play in the first year. How much is the gap coverage? I guess like most insurance, it is a gamble. I wonder if it is actually worth it. What are the odds of the vehicle being totalled in the first year? Probably pretty small.

[scfr]

FFAZ, my suggestion is to keep the original loan (since it sounds like you aren't willing to sell the van and go for something less expensive). Then sit down and come up with a schedule to have the cc debt and van loan all completely paid off within 3 years. Trim expenses if necessary. Once that's done, continue saving the amounts you were putting towards debt retirement (some for your next car puchase in cash, some for retirement, etc). I know nothing about GAP insurance, but if it's like PMI and can be eliminated once you have enough "equity" in the car, then keep an eye on that and consider getting rid of it when you can.

[noppenbd]

So on the 5-year loan, the gap insurance only comes into play in the first year. How much is the gap coverage? I guess like most insurance, it is a gamble. I wonder if it is actually worth it. What are the odds of the vehicle being totalled in the first year? Probably pretty small.

I'm sure, like most insurance products, it pays out much less than the insurance company takes in (otherwise I doubt they would continue to offer it at that price). Therefore it is probably not a good deal for the consumer. I found it offered online for $350 but they claimed the dealerships charge $500 to 700. There is no way I am paying $500 for something that pays out $2000 in an unlikely circumstance (car totaled in first year) and $0 thereafter.

[disneysteve]

I found it offered online for $350 but they claimed the dealerships charge $500 to 700. There is no way I am paying $500 for something that pays out $2000 in an unlikely circumstance (car totaled in first year) and $0 thereafter.

Agreed. It would make no sense to spend $500 to get $2,000 worth of coverage. That much coverage for a very rare occurrence should cost pennies.

[maat55]

if it gets totalled in the first yrs, i wud get around 20k
17k in the second yr, 15k in the third year (kbb value of oddysey lx).

if the loan is for 5 yrs term,

then amount I would owe after 1st yr: 21,961.47 ( 2 k from GAP)
after 2nd yr : 17,070.61 (no use of GAP)
after 3rd yr : 11,800.06 (no use of GAP)

if the loan is for 7 yrs term,

then amount I would owe after 1st yr: 23,508.54 (3.5K from GAP)
after 2nd yr : 20,284.84 (3.2k from GAP)
after 3rd yr : 16,810.88 (1.8k from GAP)

I will get more benefit from GAP only if the loan term is longer. anyway i am not going to pay off my auto loan in the next 3 yrs.

I first want to make you aware that it is not necessary to buy a new car to advoid problems.
Second, There are good and bad ways to buy a car. You would not have all these problems had you bought a slightly used car with cash. Your worst case senario would have been to put 20% down and only finance for three years max. This means you would have bought less expensive but not any less newer or reliable.

I used to make purchases like most people do by picking the sweetest piece of candy I could afford. This usually always leads to poor money management. Right now why there are more important priorities, I weigh the difference between what I want and what I need. But someday in the not so far future, I will get to take cash and buy what I want.

This long winded response is only meant to have you sit and plan out your priorities and to put a lot of thought into your major purchases. You must have a good income, I'm glad to see your looking to put it to better use.

[tripods68]

Agreed. It would make no sense to spend $500 to get $2,000 worth of coverage. That much coverage for a very rare occurrence should cost pennies.

THis just proved my point. GAP is a waste of MONEY.

[disneysteve]

THis just proved my point. GAP is a waste of MONEY.

I honestly had no idea how much gap coverage cost. If it is expensive, which it sounds like it is, than I'd agree that it isn't worth it.

Just one more reason not to buy a new car. Buy used and you don't need to worry about gap since you are generally paying pretty close to what the vehicle is actually worth, as opposed to a new car where you are typically paying thousands of dollars more than what the car is worth.

[tripods68]

You also have to remember, dealers always charge higher premiums cost for GAP and Extended Warranty. That's how they make extra commissions. But the qualify Japanese cars of today, you'll never have to use the service warranty at all (i know don't), unless of course, you keep buying crappy American cars (no offense). Like I said, unless you have history of accidents then i recommend GAP, otherwise don't buy em. It's a complete waste of $$.

[Like2Plan]

I came across this info (it is for GAP coverage at a credit union):

I have GAP and am going to refinance my loan - Does the GAP transfer to the new loan?

GAP could transfer to the refinanced loan. However, if any money is added to the loan or the term extended when the loan is refinanced, GAP will not cover these changes. The GAP you purchased is an Addendum to the loan contract on which it was sold. Any changes to the original loan terms can affect the GAP coverage.

I am refinancing my loan at another financial institution – can the GAP transfer to my new loan?
No, the GAP is nontransferable.

Again, the terms of the policy the OP purchased may be different, but the policy this credit union offers does have an escape clause within the first 60 days.

Can I cancel my GAP?

Your GAP coverage may be cancelled anytime in the first 60 days for a full refund. After 60 days the coverage is non-refundable.

[maat55]

I consider the need for Gap ins. a sign of a bad car purchase. Paying more down or paying in full is the only option I will do.

[disneysteve]

I consider the need for Gap ins. a sign of a bad car purchase. Paying more down or paying in full is the only option I will do.

That's a very good point, maat. Bottom line is that if you need Gap coverage, it means you have borrowed more money to buy the car than the car is worth.

[Nate417]

You also have to remember, dealers always charge higher premiums cost for GAP and Extended Warranty. That's how they make extra commissions. But the qualify Japanese cars of today, you'll never have to use the service warranty at all (i know don't), unless of course, you keep buying crappy American cars (no offense). Like I said, unless you have history of accidents then i recommend GAP, otherwise don't buy em. It's a complete waste of $$.

I think it is funny that people still have this rediculous perception of American cars. If you look at any of the quality ratings by a reputable source such as JD Power you will notice that today's American made cars are everybit as reliable as the Asian variety. American automakers really shot themselves in the foot throughout the 80's and 90's but they have come a long way since then. Also, you can usually pick up a comparable American car for less than the Japanese variety.