Santander Loans: Gap Insurance Included?

Santander Consumer USA offers GAP insurance, also known as guaranteed asset protection or guaranteed auto protection, to its customers. This type of insurance covers the difference between the value of a car after an accident and the amount still owed on the vehicle. While Santander previously offered its own GAP insurance product, it stopped doing so last year. However, customers can still purchase GAP insurance from other providers to cover their Santander loans. It is important to note that GAP insurance is not always included in standard insurance policies and may need to be added separately.

What is GAP insurance?

Guaranteed Asset Protection (GAP) insurance is an optional product that covers the difference between the amount you owe on your auto loan and the amount the insurance company pays if your car is stolen or totalled. When you buy a new car or truck, the vehicle immediately starts to depreciate in value. Most cars lose 20% of their value within a year. Standard auto insurance policies cover the depreciated value of a car, meaning they pay the current market value of the vehicle at the time of a claim. However, in the early years of the vehicle's ownership, the amount of the loan may exceed the market value of the vehicle itself. This is where GAP insurance comes in. It covers the difference between what a vehicle is currently worth (which your standard insurance will pay) and the amount you owe on it.

GAP insurance is one of several optional add-on products that a dealer will likely offer when purchasing or leasing a car. The cost of the product is rolled into the loan amount. However, it is important to note that these products often have eligibility restrictions and may not provide value based on a consumer's individual circumstances. The price of GAP insurance can vary, and it is worth comparing prices and coverage before purchasing. If you choose to finance a GAP policy into your loan, it will add to your total loan amount, increasing the total interest paid over time.

There are several scenarios in which it may be appropriate to consider purchasing GAP insurance for your new car or truck:

• You made less than a 20% down payment
• You financed for 60 months or longer
• You leased the vehicle (GAP insurance is generally required for a lease)
• You purchased a vehicle that depreciates faster than average
• You rolled over negative equity from an old car loan into the new loan

Ultimately, the decision to purchase GAP insurance depends on your risk tolerance and how much you could afford to pay out of pocket to cover a gap if your vehicle is a total loss.

Santander's GAP insurance issues

Santanders GAP Insurance Issues

Santander Consumer USA is a leading provider of high-cost auto finance loans to low-credit or "subprime" borrowers. In 2018, the company was fined for misleading customers about the costs of loans and the coverage of related insurance policies. This included failing to explain how their GAP insurance, or "guaranteed auto protection", would not always cover the costs of replacing a car that was destroyed in an accident.

GAP insurance, or "guaranteed asset protection", covers the difference between the value of a car after an accident and the amount still owed on the vehicle. This type of insurance is particularly useful if you have taken out a loan to buy a car, as it can prevent you from having to continue making payments on a vehicle that has been written off.

Issues with Santander's GAP Insurance

In the case of Santander, there were several issues with their GAP insurance product. Firstly, the company did not make it clear that there was a cap to the total amount of coverage provided. This meant that many borrowers were surprised to find that their insurance would not fully cover the cost of replacing their vehicle. Additionally, Santander allowed borrowers to make interest-only monthly payments without explaining that this would increase the total cost of the loan.

Customer Experience

Some customers have reported issues with Santander's GAP insurance, with one person claiming that they still owed $2,000 on their loan even though their car had been written off in an accident. The customer also reported that Santander was being "shifty" and not providing clear information about their GAP insurance coverage.

Resolutions

Following the 2018 settlement, Santander agreed to pay a fine and strengthen its consumer protections. The company stopped offering its own GAP insurance product and worked to improve its consumer protection controls. However, it is unclear how effective these changes have been in addressing the issues with their GAP insurance product.

Where to buy GAP insurance?

When buying a new car, you can get GAP insurance from the dealer or your auto insurance company. Buying GAP insurance from a dealer can be more expensive if the cost of the coverage is bundled into your loan amount, which means you will be paying interest on your GAP coverage.

You can typically add GAP coverage to an existing car insurance policy or a new policy, as long as your loan or lease hasn't been paid off. Buying GAP insurance from an insurance company may be less expensive, and you won't pay interest on your coverage. If you already have car insurance, you can check with your current insurer to determine how much it would cost to add GAP coverage to your existing policy. Note that you need comprehensive and collision coverage to add GAP coverage to a car insurance policy.

Some providers of GAP insurance in Texas include:

• Associated Credit Union of Texas: You can either add GAP coverage to your existing auto loan or opt for it during the loan application process. Refunds are available if the coverage is canceled within the first 60 days.
• Allstate: Allstate provides GAP insurance for its Texas customers. The insurer typically suggests this coverage for those who have paid less than 20% upfront for their vehicle, have auto loans extending 60 months or more, or are leasing their vehicle.
• Greater Texas Credit Union: This credit union offers affordable GAP insurance to its members, available up to 18 months from the start of the auto loan.
• USAA: USAA offers GAP insurance among its range of budget-friendly insurance options for military members, veterans, and their families.
• Texas DPS Credit Union: Its Gap Plus option includes standard GAP coverage and deductible assistance in cases where your vehicle isn't totaled. It also offers a $1,000 discount on your next loan with the credit union.

Is GAP insurance worth it?

Guaranteed Asset Protection (GAP) insurance is worth it for those who want to protect themselves from financial losses in the event of their new vehicle being stolen or totaled. GAP insurance is a supplemental coverage that pays the difference between the actual cash value of your car and the amount you currently owe on your loan or lease. It is worth noting that GAP insurance is only applicable if you have a loan or lease on your vehicle.

GAP insurance is worth considering if you have a long payoff period, have made no down payment or a small down payment (less than 20%), or have rolled over negative equity from an old car loan into a new one. Additionally, if you have purchased a vehicle that depreciates faster than average, GAP insurance can help minimize your financial losses.

On the other hand, GAP insurance may not be necessary if you have made a substantial down payment of at least 20% on your vehicle, or if you are paying off your car loan in less than five years. It is also worth cancelling your GAP insurance if your loan balance is lower than the book value of your vehicle.

The cost of GAP insurance varies depending on the provider and your individual circumstances. Auto insurers typically charge a few dollars a month or around $20 a year. Lenders, on the other hand, may charge a flat fee of $500 to $700. It is important to note that if you add GAP insurance to your loan, you will also be paying interest on it, increasing the overall cost.

When deciding whether GAP insurance is worth it, it is essential to consider your financial situation and the value of your vehicle. If you can afford to pay the difference between the amount owed and the car's value in the event of a total loss, then GAP insurance may not be necessary. However, if the financial burden of such an event would be difficult to manage, then GAP insurance could provide valuable peace of mind.

What does GAP insurance cover?

Guaranteed Asset Protection (GAP) insurance, also known as 'gap insurance', is an optional product that covers the difference between the amount owed on an auto loan and the amount the insurance company pays if the car is stolen or totaled. This type of insurance is designed for people who finance or lease their vehicles.

Gap insurance covers the gap between a vehicle's actual cash value and the outstanding balance on a loan or lease if the car is stolen or totaled. It is important to note that gap insurance does not cover costs related to vehicle repairs, personal injuries, or other accident-related expenses. It also does not cover you if your car is damaged and can be repaired.

For example, if you finance a $25,000 car and a few months later it is in an accident and declared a total loss, your standard insurance will cover the loss. If the insurance adjuster determines the actual cash value of your car to be $20,000, but your loan balance is $24,000, you owe more on your loan than the car is worth. In this case, gap insurance would cover the remaining $4,000 that you would otherwise have to pay out of pocket.

Whether or not to purchase gap insurance depends on the value of your car and the balance on your loan. If the value of your vehicle is higher than your loan balance, gap insurance may not be necessary. On the other hand, if you are financing your vehicle and put less than 20% down, gap insurance may be a wise investment.

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