Is there a profit in buying lease or loan gap coverage? What are the some retained car values for cars?

Your car’s value will drop the minute you drive out of the dealer’s lot – that’s a given. If your car is totaled, don’t expect the same value that you paid for at the dealership, either. When your car is totaled, you will still be responsible for paying the rest of your lease.

Because your car might be totaled and because you’re still going to have to pay for the rest of the lease anyway, you might end up paying hundreds, maybe thousands, more than you were supposed to. However, this misfortune can be prevented by purchasing gap insurance.

Gap insurance is an excellent purchase for anyone who is currently leasing a car. The difference between the amount your insurer pays for your totaled car and the amount you owe on your lease or loan will be paid by gap insurance.

Many automobile consumers first assume that if your car is declared a total loss in an accident, you are going to have to pay off the amount you paid for the car and you’re going to recover the amount you owe on the car.

However, what consumers fail to realize while making this assumption is the fact that cars don’t hold their value in this manner.

It is important to keep in mind that once you drive the car off the dealership lot, fees like those for licensing, destination charges, advertisement, and documentation fees immediately drop once the car is yours for the time that you are leasing it.

These fees will probably total more than $1,000, so don’t be surprised when you see a sudden difference. These are all one-time costs that you won’t see charged for that car ever again.

According to auto industry standards, car losses between 10 and 15 percent of its value all occur during the first year. For a car that will cost about $18,000, we’re talking between $1,880 and $2,700 in car losses during the first year. With one-time costs, you will be down between $2,800 and $3,700 from the initial value.

It is highly crucial to know that you haven’t paid for that much of the car’s value in the first year when you loan or lease a car. That’s exactly why the first year is the time when the difference between what you owe and what the car is worth could be the largest.

The car’s depreciation will begin to slow over the next two or three years, then eventually level off. You might want to consider dropping gap coverage by the fourth or fifth year of ownership since the value of the car and what you owe actually aligned.