GAP Insurance provides cover for the difference between what your vehicle may be worth in the event of an insurance claim, and any outstanding balance left on your loan or lease agreement.
In the event of your vehicle being written off, or damaged to such an extent that it is no longer usable, the payout from your insurance company is likely to be significantly less than the current balance left on your finance deal.
Ford provides two types of coverage of this type of insurance. Both are in effect optional if you had arranged finance for your vehicle, but are included in the cost of the lease agreement if you lease it.
This is the standard fort cover, and will work like any other type of insurance, in terms of level of cover and paying a premium for it. At time of writing (September 2018) the coverage limit is the lesser of US dollars 125,000 or 150% of MSRP.
The coverage can apply to both new and used vehicles, Is normally for a term of up to 96 months and includes cover of up to $1000 of your insurance deductible.
Please note that these terms and conditions can change over time, and should be checked at time of purchase.
That are also some exclusions to the benefits of the cover, normally relating to errors around fraud or intentional damage, or if there are problems relating to the payment of the vehicle such as a repossession or legal conversation by a public official.
This is A similar policy to the GAP Coverage policy outlined above: but also includes a dealer credit of up to US$1000 towards a cost of a replacement vehicle at a Ford dealer.
Whilst this may seem attractive, that in mind that any decision regarding price of a new vehicle is likely to include A significant discount on any manufacturers recommend price, so the value of the Advantage $1000 replacement Credit is probably fairly questionable.
Gap Insurance and Ford Credit Leasing
When you use a vehicle you effectively rent it for hire it for a period of time, and do not have any stage hold little to the vehicle.
As such, Ford retain title, and need to make sure that their investment is secure. They will arrange Gap Insurance and include the cost in the lease agreement.
This does not mean that they are necessarily paying for it, simply that it is not considered an optional extra.
When leasing any Ford Vehicle, it is worth remembering that all areas of the lease agreement are open to negotiation, including the cost of insurance.
The cost of Ford GAP insurance is thankfully normally much less than people think it is, largely because people assume that because it is a type of auto insurance it is going to be astronomical.
In fact the cost is normally fairly minimal, but it is an important form of insurance that ford credit and most manufacturers will insist the customer has in place as part of any agreement to purchase or lease a vehicle.
GAP insurance comes into effect only in the event of an accident or situation for the car is lost or stolen and is in effect a complete write-off.
It is probably easier to understand the thought of in terms of purchasing a new car, but can equally apply to buying a car of any age or condition, or leasing a car or truck.
When purchasing a new car it is well-known that as soon as it leaves the showroom it would depreciate by a certificate amount, often thought of to be between 10 and 15%.
Over time it will further depreciate in value, often quite significantly in its early years and if there is a high mileage on it.
Ford Gap Insurance Cost
In the event that it is either to be damaged or stolen or in some other way a complete write-off the insurance value will only reflect its market value at the time of loss.
In truth insurance companies tend offer figures at the very low end of the market value and often do not budge.
What this means in practice is that there is normally a significant GAP between what is left on the car laden which will have been based on the final sale price of the vehicle, and what is payable either insurance company at the time of loss.
This means that there will be an outstanding debt which will still be owed by the customer. GAP insurance is designed to cover the difference between the two, and in effect on the gate the debt which would otherwise be left in effect as an unsecured loan.
Anyone participating in a Ford lease program, more commonly called the red carpet lease program, will be required to have some type of GAP insurance on their car or truck, the issue is more likely to be who will pay for it.
Gap Insurance is a type of insurance that is designed to cover any difference between the final value of the vehicle as agreed at point of sale or lease, and its insurance value if it is damaged or destroyed or is a write-off in the event of an accident or total loss.
The logic of this type of insurance is fairly simple. When buying or leasing a new car or truck, or even a used one, it will have a final price. Obviously with a new car or truck its appreciation is quite significant the moment it leaves the showroom. Even a used car will appreciate your time as well.
Ford Lease require Gap Insurance?
If the car or truck was damaged to a point where it was unrepairable, then the insurance company would assess its value at current market rates basing their valuation on its age, condition and mileage. Inevitably they would offer an amount that would be considerably less than its value at point of sale or lease agreement.
This means inevitably there is quite a significant difference between the two figures, which GAP insurance is designed to cover. This will be an additional insurance policy to the normal auto insurance policy and auto insurance requirements that Ford credit will deem it needs to be in effect.
It is in both parties interests to have GAP insurance, and the cost should not be prohibitive, and should be significantly less than would be anticipated or expected given that it is a type of auto insurance. It is not unusual for the dealership to agree to pay for the GAP insurance, but it is simply one area of additional extras that can be negotiated along with all other errors of the lease agreement.