Carmax Gap Insurance: What You Need To Know

CarMax offers GAP insurance, which covers the difference between the appraised value of a car from insurance and the remaining financed balance, including the deductible in the event of a total loss. This type of insurance is often purchased when the remaining loan balance is higher than the car's value, and it can be included in monthly payments or paid upfront. MaxCare, on the other hand, is an optional extended service plan that covers repairs and provides emergency roadside assistance, rental reimbursement, and nationwide protection. It is important to note that MaxCare is administered by third-party providers, and CarMax is not a party to the contract.

CarMax GAP insurance covers the difference between the appraised value and remaining financed balance

CarMax GAP insurance covers the difference between the appraised value and the remaining financed balance. This is particularly useful if you are planning on just paying the minimum for the life of the loan. If you are planning on paying off the car faster, you may not need GAP insurance.

GAP insurance will also cover your deductible for a total loss. If you pay off the car early, you will get a refund on your GAP insurance. The systems will try to run a periodic check to see if the car still has liens and force a refund. However, you can also cancel the insurance right before making your last payment and get a refund.

GAP insurance is worth considering if you have negative equity from a trade that you haven't disclosed. If you don't, then a CarMax extended service plan may be more suitable. This plan, called MaxCare, is an optional extended service plan that can be tailored to your monthly budget and provides coverage of your vehicle's major systems and hundreds of parts, inside and out, for several years.

It also covers your deductible for a total loss

CarMax GAP insurance is an optional auto insurance coverage that applies if your car is stolen or deemed a total loss. When your loan amount is more than your vehicle is worth, CarMax GAP insurance coverage pays the difference. For example, if you owe $25,000 on your loan and your car is only worth $20,000, your CarMax GAP insurance coverage covers the $5,000 gap, minus your deductible.

In addition to making up the difference in appraised value (from insurance) vs. your remaining financed balance, CarMax GAP insurance will cover your deductible for a total loss. This means that if your vehicle is declared a total loss or it's stolen and not recovered, CarMax GAP insurance will cover the difference between the amount paid out by your comprehensive or collision coverage and the balance left over on your vehicle loan or lease, minus your deductible.

For example, if you owe $25,000 on your loan and your car is only worth $20,000, your CarMax GAP insurance coverage will pay the $5,000 gap, minus your deductible. So, if your deductible is $500, CarMax GAP insurance will cover a total of $4,500.

When to consider CarMax GAP insurance:

• If there is a significant difference between your car's actual value and what you still owe on it.
• If you are leasing your car.
• If you made a smaller down payment on a new car.
• If you have a longer financing term for your vehicle.
• If you want to protect yourself against depreciation.

How to purchase CarMax GAP insurance:

You can purchase CarMax GAP insurance from the dealership where you bought the car. However, it's important to note that the cost of CarMax GAP insurance will typically be rolled into your lease or loan, which means you'll likely pay interest on it.

The answer will depend on your situation. CarMax GAP insurance is often worth the cost of coverage in certain situations, while in others, you may be able to skip this coverage. CarMax GAP insurance is usually very affordable, with an average cost of $89 per year in the US, or about $7 per month. However, CarMax GAP insurance premiums can vary depending on your age, insurance company, and state.

• You owe more on your loan than what your car is worth.
• You made a small down payment on your car, under 20%.
• You don't have enough savings to pay the gap if your car was totaled or stolen.
• You drive more than 15,000 miles a year, as this accelerates your car's depreciation.
• Your vehicle type depreciates at a faster rate.

GAP insurance is purchased when you finance your vehicle

GAP Insurance When Financing a Vehicle

GAP insurance, or guaranteed auto protection, is an optional form of insurance that covers the difference between the depreciated value of a car and the loan amount owed if the car is involved in an accident. It is particularly useful for those who have financed or leased a car without a down payment, as the amount borrowed may be more than the total value of the car.

If your car is leased or financed, and you have made a small down payment (less than 20%) and/or have a long payoff period, then GAP insurance is worth considering. It is also useful if you have purchased a vehicle that depreciates faster than average, such as a luxury sedan or SUV.

If your vehicle is stolen or involved in an accident and is declared a total loss, GAP insurance will cover the difference between the insurance payout and the loan amount owed. It is important to note that GAP insurance does not cover your insurance deductible, and you must have collision and comprehensive insurance in order to purchase GAP insurance.

Where Can I Buy GAP Insurance?

GAP insurance can be purchased from car insurance companies, banks, and credit unions. It can also be bought through a car dealership, but this option is typically more expensive as the cost is rolled into your car loan, resulting in additional interest charges.

The decision to purchase GAP insurance depends on your financial situation and the value of your vehicle. If you have a large car loan and/or a vehicle that depreciates quickly, GAP insurance can provide valuable protection. However, if the amount you owe is less than or only slightly more than the value of your car, then GAP insurance may not be necessary.

When to Drop GAP Insurance

It is recommended to drop GAP insurance when your car loan balance is lower than the current value of your vehicle. This can be determined by using pricing guides such as Edmunds or Kelley Blue Book.

Alternatives to GAP Insurance

There are alternative insurance options to consider instead of GAP insurance. New car replacement coverage reimburses you for the cost of a new car of the same make and model, minus your deductible. Better car replacement coverage provides funds for a newer or better model of your totaled car.

You can cancel your GAP insurance and get a refund

If you want to cancel your GAP insurance and get a refund, there are a few things you should know. Firstly, you can cancel your GAP insurance policy at any time, but your refund will depend on whether you paid for your GAP insurance upfront or on a monthly basis. If you paid upfront for your GAP insurance, you will likely receive a refund for the unused portion of the policy. However, if you paid monthly, your refund may be much smaller or non-existent.

The amount of your refund will also depend on factors such as the value of the vehicle, the amount of the auto loan, the vehicle's current mileage, and the loan repayment term. To calculate your approximate refund, divide the total cost of your GAP insurance by the number of months of coverage, giving you the monthly premium. Then, multiply this monthly premium by the number of months left on your policy. This will give you an estimate of your refund amount.

It's important to note that you won't be eligible for a refund if you have filed a claim against the policy or if your vehicle has been totaled or stolen and you need to file a GAP insurance claim. Additionally, before cancelling your GAP insurance, make sure that it isn't a requirement of your loan or lease agreement. Usually, this means that you have paid off the loan or have enough equity in the vehicle, eliminating the "gap" between the vehicle's value and the loan amount.

To initiate the cancellation and refund process, contact your insurance agent or company to let them know of your intention to cancel. They will provide you with the necessary paperwork and inform you of any additional requirements. Typically, insurance carriers will need an odometer disclosure statement to verify the car's current mileage, which you can obtain from your state's DMV website. If you've paid off your auto loan, the insurance company may also request a letter from your lender confirming this. Once you've submitted all the necessary documentation, you should receive your refund, typically in the form of a physical check or direct deposit.

GAP insurance is cheaper when offered through a CarMax lender

Guaranteed Asset Protection (GAP) insurance is an optional insurance product that covers the difference between the amount owed on a vehicle and its actual cash value (ACV) in the event of a total loss. This type of insurance is particularly useful for those with high-interest auto loans, small down payments, or long financing terms, as it can protect them from being "underwater" on their vehicle, i.e., owing more than the vehicle is worth.

When offered through a CarMax lender, GAP insurance typically costs between $30 and $60 per year, making it a relatively affordable option for those seeking additional protection. In comparison, GAP insurance purchased from a dealership can cost between $400 and $700 as a one-time lump-sum payment, which is then added to the auto loan and accrues interest. This makes the CarMax lender option significantly more cost-effective for those seeking GAP coverage.

The affordability of GAP insurance through a CarMax lender is further enhanced by the flexibility of payment options. Customers can choose to include the GAP insurance cost in their monthly payment or pay upfront using a credit card, cash, or check. This flexibility ensures that individuals can select the payment method that best suits their financial situation and preferences.

In addition to the cost savings, opting for GAP insurance through a CarMax lender provides the convenience of a streamlined process. Customers can add GAP insurance to their CarMax financing agreement directly, eliminating the need to source insurance from a separate company. This simplifies the overall vehicle purchasing experience and ensures that individuals can obtain comprehensive protection for their new car in a straightforward manner.

While GAP insurance is not mandatory, it serves as a valuable financial safeguard for those at risk of having their vehicle's value drop below the amount they owe. By choosing GAP insurance through a CarMax lender, individuals can benefit from both the financial savings and the simplified process, making it a practical choice for those seeking added peace of mind without breaking the bank.

Frequently asked questions