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Do I need gap coverage when buying a used car?

Posted by Shabana Motors - 01 December, 2023

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When purchasing a used car, there are other factors to consider that protect your investment. Should you buy gap coverage when purchasing a used car? What is the benefit of having gap insurance?

To learn more about this topic and help you make a wise decision, the following provides what you need to know when financing your new purchase.

What is a gap?

Gap stands for Guaranteed Asset Protection (GAP) coverage. While this is an optional add-on coverage for your vehicle, this coverage protects your investment in the event your car is declared a total loss. If you are a Texas resident, this coverage is known as a Debt Cancellation Waiver (DCW).

How does gap insurance work?

Gap insurance is a protection that covers the “gap” or difference between what you owe on your car and the actual cash value (ACV) should your car be declared a total loss. A total loss could be declared by your collision insurance company in the case of a bad accident where the damage to the car is extensive and too expensive to repair than to replace it. Another cause of total loss could be from natural disasters, such as your car being flooded or damaged by a fallen tree caused by storm winds.

Let’s look at a scenario of how the gap coverage will protect you.

For instance, your 3-year-old car was declared a total loss, and the actual cash value (ACV) is $10,000. This is the amount your car is worth at the time of the loss, but you still owe a balance of $13,000 to pay off your car. While you may recover $10,000 from your insurance, you still must pay your financial institution the $13,000 balance. That means you will have to pay the “gap” or difference of $3,000 out-of-your-pocket. This is where the gap or debt cancellation waiver coverage protects you as it will pay the difference (minus your deductible), so you don’t need to pay any balances from your pocket.

Does gap coverage pay for car theft?

If your car is stolen and is not found or recovered, your gap insurance will cover the difference between what you owe on your car and the actual cash value (ACV), minus the deductible. Imagine your precious car gets stolen, and on top of that, you get stuck in paying the difference between the value and what you owe. This is a misfortune you would want to avoid.

Does it make sense to get gap insurance for a used car?

Used cars, unlike their new counterparts, have already undergone a significant portion of their depreciation. However, they still depreciate over time. In the unfortunate event of an accident, theft, or other form of loss, the insurance payout will likely be based on the car's depreciated value. This can leave you with a substantial gap between the insurance settlement and the remaining loan balance.

If you purchased your used vehicle with in-house financing with a long loan term to make your monthly payments more manageable, there is a chance for this gap between the car's value and the loan balance to be greater. Gap Coverage becomes crucial in bridging this financial disparity.

If you purchase a used car at a buy-here, pay-here used auto dealer and you finance your vehicle, you should include gap coverage. Also, consider gap insurance if the value of your car is below the amount you owe to your financial institution.

Do Used Car Dealers Offer Gap Coverage?

The best-used car dealerships prioritize customer satisfaction and aim to provide a positive buying experience. Recommending Gap Coverage is a testament to their commitment to the financial well-being of their customers. It adds an extra layer of protection and peace of mind, fostering a long-term relationship between the dealership and the buyer.

To the benefit of its customers, Shabana Motors offers gap coverage under the Debt Cancellation Waiver program in the state of Texas to ensure the investment you make when purchasing your car is protected. Also, Shabana Motors is Houston’s most trusted buy here, pay here car dealership with over 40 years of serving the Houston community. Check their vast inventory of used cars and test drive the vehicle you are ready to purchase. And don’t forget to add coverage to the investment you made with your newly acquired car.


In the dynamic landscape of used car purchases, being well-informed is the key to making a sound investment. Gap Coverage is not just an added expense; it's a safeguard against unexpected circumstances that could otherwise leave you in a financial hole. Particularly for customers with bad credit or no credit, Gap Coverage is a wise choice.

As you visit the best-used car dealership in Houston, inquire about Gap Coverage options under the Debt Cancellation Waiver program with your Shabana Motors sales associate and consider how it aligns with your financial strategy. Remember, investing in Gap Coverage is an investment in your peace of mind and financial security, ensuring that your journey with your newly acquired used car remains a positive and worry-free experience.




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Topics: Car Financing, Used Cars, in house auto financing, pay here used car dealership, Best Used Cars with Warranty in Houston, Shabana Motors, used cars on sale near me, best used car dealership houston, bad credit no problem

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