Q: Should I buy extra protection products, like GAP insurance and an extended auto warranty, for my car?

A: Guaranteed Asset Protection (GAP) insurance and extended auto warranties can provide you with peace of mind and more than cover their cost. Let’s look at these products, how they work and why you may want to purchase them from your credit union.

What is Guaranteed Asset Protection (GAP) insurance?

GAP insurance is designed to bridge the financial gap between the actual value of your car and the remaining balance on your auto loan if there is a total loss due to accident or theft. For example, if you own a car with a remaining auto loan balance of $15,000, and you were to get into an accident, you may get just $10,000 from your insurer if that is the current value of the car. They’ve left you with a $5K balance on your auto loan – for a vehicle you don’t even have. With a GAP policy in place at the time of the accident, the plan would cover the remaining balance of the loan. That’s five grand you won’t need to come up with to meet your loan obligation.

What is an extended auto warranty?

An extended auto warranty, or Mechanical Breakdown Protection (MBP), covers the cost of specific repairs after the manufacturer’s warranty expires. It serves as a financial safety net against unexpected mechanical failures, which can be both costly and inconvenient.

Why do I need extra protection for my vehicle?

GAP insurance and an extended warranty can offer you strong protection and a safeguard against unpredictable events, including:

• Accidents and total losses. In the event of a severe accident resulting in a total loss, GAP insurance ensures that you are not left with a loan balance after the insurance settlement.
• Theft. Vehicle theft can be financially devastating, especially if the insurance payout doesn’t cover the remaining loan balance. GAP insurance protects against this scenario, ensuring you are not paying for a vehicle you no longer have.
• Mechanical failures. As vehicles age, the likelihood of mechanical issues increases. An extended warranty can mitigate these expenses, paying for parts and labor for covered repairs.
• Financial protection against depreciation. New vehicles can lose up to 20% of their value within the first year. If your car is totaled or stolen during this period, the insurance payout might be less than the outstanding loan balance. GAP insurance covers this discrepancy.

Benefits of securing extra auto protection through your credit union:

1. Comprehensive coverage. Credit union-offered extended warranties provide extensive protection, covering a wide range of components and systems.
2. Flexible and affordable plans. Credit unions typically offer GAP insurance at rates that are more favorable than traditional lenders or dealerships.
3. $1,000 credit towards Forrit CU financing of a replacement vehicle if purchased within 120 days.
4. Personalized service. With a focus on member satisfaction, credit unions provide tailored advice, helping members choose the coverage that best suits their needs.

To purchase these extra safeguards for your car, connect with Forrit CU today.