Being in an accident and having a vehicle totaled is traumatic enough. Imagine the scenario where the insurance settlement amount on the totaled vehicle is not sufficient to cover the loan payoff. This can and does happen as more and more vehicle loans are “upside-down” over time, meaning that the value of the vehicle is less than what is owned on the vehicle loan. This “upside-down” situation is especially prevalent on purchases where a trade-in was financed into the new purchase. Certain vehicle makes/models also depreciate faster than others. The credit union has a VisualGAP tool that illustrates any current and projected differences between values and loan balances over the life of a loan.
Guaranteed Auto Protection (GAP) is a valuable product that North Alabama Educators Credit Union offers our members to minimize a total vehicle loss situation. GAP helps to cover the difference between the actual cash value paid by the primary insurance claim settlement and the vehicle loan balance at the time of the loss. Another benefit of GAP is that any deficiency balance caused by the borrower’s deductible will be reimbursed up to $1,000, where permitted. Without GAP, borrowers may be subject to owing anywhere from a few hundred dollars to several thousand dollars on a vehicle that they no longer have. Many primary insurance companies are now using a “local market value” analysis to determine the claim settlement amount which is sometimes lower than an average NADA price.
The best part about the credit union’s GAP product is the price. Members can purchase GAP coverage (as of September 2011) through North Alabama Educators Credit Union at a price of $195 for each loan covered. Automobile dealers routinely sell their GAP products for $400-$700 at their finance offices. The credit union helped one of members earlier this year with a vehicle refinance and that member received a prorated refund of roughly $600 from the GAP product that had been purchased at the dealership.
Members can purchase GAP coverage for their vehicle loan at the time of loan inception or anytime afterwards as long as there has not been a total loss situation prior to the date of purchase. If GAP is purchased after the loan inception date, the coverage is not retroactive but the coverage would begin on the GAP purchase date and cover the remaining term and balance. Loan Officers are available at any office to present the VisualGAP illustration to help in any GAP purchase decision. The GAP product is yet another example of how the credit union can save money for the membership.