We recognize that dealing with a total loss vehicle is a hassle, and we’re here to do what we can to support you while you navigate through the paperwork and logistics. In most states, your car will now have to have a salvage title, which both reduces the value and makes selling it more difficult. You’ll still have to pay the remainder of your loan in full (regardless of the size of the insurance check), and your lender or lienholder cannot release the lien on the title until all debts are settled. GAP policies vary, so it’s worth confirming what the retained salvage policy is with your GAP provider. That’s because it can no longer sell it to the highest bidder. Your insurance company will likely reduce the settlement amount by whatever your car is worth in its wrecked condition or “salvage amount”. Through a process called “retaining salvage” or “owner retain”, you can keep your car even if it’s declared a total loss, but it’s a tricky process that comes with caveats: If you don’t have enough savings to cover the difference between the fair market value of your vehicle and the remaining loan balance in the event of a total loss. You’re taking out a loan that is greater than the value of your vehicle. If it is not optional in your negotiation, also consider what this extra benefit can provide as you consider whether to go through with the car’s purchase. In other cases, the lender will require GAP coverage in the financing of a car. As with extended warranties and prepaid maintenance plans, find out exactly what your GAP will and won’t cover before you make a decision. Keep in mind that GAP will not cover missed payments or interest that has accrued on late payments. If this is your case at the time of total loss, GAP helps cover the difference between the amount paid by your insurer and your remaining loan balance. It is common for you to owe more than the car is worth at the beginning of a loan. Your regular car insurance usually covers the fair market value of the car, not the amount you still owe on your loan. In the event that your car is totaled or stolen, Guaranteed Asset Protection (or “GAP”) is intended to protect you if the remaining balance on your account is larger than the insurance proceeds received for the car.
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