Do I Need Extended Warranties and GAP Insurance for My Car?
Written by DriveAxis.ca February 23, 2022
You’ve recently gotten a car through financing, and you’re excited to take it driving. You’ve gotten car insurance, but do you have GAP insurance? How about extended warranties?
These extra features are not included in the cost of the car, but you’d be wise to buy them upon purchasing. It’s true that you could save yourself money by not paying for them, and yet these protection plans provide something that money can’t always buy: peace of mind.
Here’s a close look at extended warranties and GAP insurance, and how they can benefit car owners and their new purchases.
What is GAP insurance?
Guaranteed Auto Protection (GAP) is additional automobile coverage that provides financial protection should you ever completely lose your car. Specifically, GAP is a policy that substitutes the actual cash value between your vehicle and how much you owe in case of an emergency. It is only available from dealers and financing companies as a one-time premium, and designed specifically for people who finance their cars.
GAP insurance is made to protect people from negative equity, the situation that happens when the amount owing on your vehicle exceeds the trade-in value of your vehicle. Also known as an “upside down” loan, negative equity is what can happen if you only pay a small amount for a down payment, or take out a loan with very long terms.
This means that if the car that you’re financing happens to get totaled or stolen and you owe more than the car is worth, you’ll be responsible for paying the difference even after the car insurance is paid. This is because car insurance only pays for the actual value of the car, not what you owe on it.
What is GAP insurance for?
GAP insurance protects people who owe more money on their financed cars than they are worth. And because negative equity has become a common occurrence these days, GAP insurance is designed to protect people against paying large debts that could unexpectedly appear.
To illustrate this, here’s a real-world situation: A person has a car with an outstanding auto loan worth $15,000. The car gets into a car accident, and is completely totaled. Due to depreciation, car insurance only pays the current value of the car, which is $10,000. (To keep it simple, we won’t mention insurance deductibles)
There are two possible outcomes for this situation:
- Without GAP insurance, this person is forced to pay for the difference out of his own pocket. This means even though this person received a payment from the insurance company, he or she still has to pay $5,000 of his or her own money.
- With GAP insurance, this same person won’t need to pay anything at all. The difference between the car’s value and what he owes is completely taken care of.
For this reason, GAP insurance can be extremely beneficial for people who finance their cars. It provides peace of mind by reducing the financial risk that your negative equity poses to you.
Should I get GAP insurance?
Guaranteed Auto Protection is ideal for people who don’t have enough money to pay the difference in case of a total car loss, or don’t want to pay the difference out of pocket. As well, it is a smart move to consider if you have rolled a prior financing agreement into your current one.
If you put down less than 20% on a car, it would be a wise move to get gap insurance at least for the first couple of years you own it. After the mid-way point of your car loan, you should have made enough payments to exceed the value of the car.
DriveAxis.ca offers GAP insurance with these terms:
- Covers vehicles up to $50,000 in purchase price.
- Covers GAP up to $5,000
- $1,000 loyalty credit on your replacement vehicle
- Up to $250 reimbursement for rental vehicle expenses
Read more about DriveAxis.ca’s GAP insurance here.
What are extended warranties for cars, and why do I need them?
A manufacturer’s warranty is a guarantee by a manufacturer to repair or service a product should a malfunction or breakage occur within a certain time frame. As cars are complicated devices, car warranties are usually broken down into specific machine parts of the car.
When purchasing a used vehicle, drivers need to be aware that these warranties are often usually expired or close to expiring, meaning that the parts they are meant to protect won’t be covered anymore by the manufacturer. This is important because car warranties usually cover parts that have the biggest repair costs that will inevitably happen over time and through normal wear and tear.
With an extended auto warranty, you don’t have to worry about losing this coverage. Extended warranties provide drivers with peace of mind knowing that should something like your engine or transmission break on your car, you won’t have to worry about the cost of repairs that could set you back hundreds if not thousands of dollars.
Another benefit to extended warranties is that customers can pick and choose whatever they want to suit their needs with extended service packages. If you’re concerned about the differential on your aging car, you won’t have to worry with an extended warranty. As well, extended warranties can also include roadside service and towing.
Can I purchase an extended warranty at DriveAxis.ca?
DriveAxis.ca offers extended warranties on all of our cars, for which 90% of our customers purchase an extended warranty for added peace of mind. To protect your investment from financial burdens, we offer a selection of extended service packages that give you uninterrupted coverage on parts and labour, for many years or thousands of kilometers following the expiration of factory warranty.
Available options include:
- Engine (gas and diesel)
- Transmission/Transaxle (RWD/FWD)
- Differential/Transfer Case (RWD/AWD/4WD)
- Roadside Assistance/Towing
- Seals and Gaskets
The roadside assistance/towing will cover battery boosting, flat tires, and vehicle entry assistance as well as towing expenses. The towing coverage includes 50 km/tow (250 km in total), 24/7 hr roadside assistance, and a 1-year membership with DAA.
After your extended warranty expires, you can renew it by contacting DriveAxis to reach our Fulfillment Centre. The vehicle would undergo an inspection and then we would submit a new warranty application for you.
Find out more about DriveAxis.ca extended warranties here.