When to dump GAP insurance?

Hello Hackers!

I’m 3 months in on a lease with TFS. I paid for GAP upfront through TFS. Current payoff is ~$39k. Mid value on KBB trade in is $35.5k and private party $39.5k.

I had anticpated carrying the GAP with TFS through the end of the year. I understand my insurance might value the car somewhere inbetween the two KBB figures above. To halve it lets say I get $37.5 in the event of total loss. At what point would the experts dump the GAP?

Based on this hypothetical I’ve got roughly a $1500 difference now. Is that close enough that you would suggest dumping now? Or should I just sit tight and wait until the end of the year. At that point we’ll about 6 months in and values should be closer to a complete wash.

This is one area I feel like I’m still a bit uneducated on.


Can you even cancel the GAP insurance? Either way, it’s only a few hundred for the entire lease term, so just keep it.

Gap is only about $300 why would you ever cancel it? Worst case scenario, I’ve seen it cover the deductible on your insurance…

Yes, with TFS you can cancel. I want to say it was $750 up front. They pro-rate the amount and cut you a check if cancelled.

Never get rid of GAP on a lease ever.

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Thanks for the reply. I’ve read mixed reviews on GAP. One opinion was that once the lease is paid down close to value of the car its a wash and not needed.

As high as manufacturer’s are setting residuals right now, I would say you will have negative equity for most of the lease unless you get a hackerworthy deal. In that case, you will be good at the start of the lease and then progress into negative equity as the lease runs

We’re tallking a Toyota Highlander here. Holds its value pretty well.

Had a 2015 Highlander that we traded in at the time of the lease. Granted, that vehicle was a purchase but we had almost $10k in equity at the time of trade.

My residual is roughly $25.5 when the lease comes to term. 45k mile lease.

You can obviously do what you want. But to me it is not worth saving a few hundred bucks on the off chance you’d owe thousands. Everyone’s risk/reward benefit is different.

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I’d say keep it until your trade-in value and the remaining balance is aligned. I can’t imagine many leases where you’d be in this position.

Its a shame Geico does not offer GAP insurance. Had I been more prepared on the ins and outs of GAP insurance before doing the deal I would have sought a 3rd party insurer. Still migth be worth exploring. Although I’m not sure if a 3rd party would provide coverage on a lease that has already begun.

I highly doubt you ended up with 10k equity unless you put something down, and you would have to subtract whatever you put down from the 10k amount for your true equity. Or maybe you drove it for 10 years and it was paid off.

Not saying that I will have 10k equity when the lease is up. I was using my previous Highlander as an example of how well they hold their value. 3 year old Highlander with 50k being traded for $30k.

I’ll be estatic if I have any equity when the lease is up. Hoping there’s something left on the bone. :crazy_face:

Yes, they will always be happy to take your money. I think your fist mistake was paying $750 for Gap insurance in the first place. It should have been more than $400. It seems like you are hell bent on cancelling it, so cancel it. Just so you know though, it doesn’t reduce your payment You just get a check back and that check will probably not be a dollar for dollar prorated amount after they take out their fees and other cockamamie crap. I think, as most people have pointed out, it may not be worth the effort and the added risk to get a few hundred dollar check.

Next time ask before you buy :slight_smile:

I believe cost varies from $250-$350 for GAP. Just FYI.

I was referring to your financed Highlander. And no, you can’t compare that with a future lease, especially because your numbers are suspect. The only way you can get 10k equity on a car 3 years after you bought it is if you made a significant down payment - which is not equity at all, your down payment shrunk your payoff amount.

Not hell bent. Just gathering information/opinions from an informed community. I had no problem admitting to overpaying. I did. But as someone who has realized that mistake I am now seeing what options I might have to correc it.

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I put $10k down at purchase. So effectively got that money back at 0% interest. But in terms of the payoff I had 10k in equity of my own money. Equity nonetheless.

I’m confused, you’re saying the amount you got for the car was 20k over your payoff?

no. my payoff was 20,xxx. trade was $30k