GAP Insurance (Guaranteed Asset Protection) is coverage that pays the difference between what a customer owes on their auto loan and what their insurance pays out if the vehicle is totaled or stolen.
When a customer finances a vehicle, there is often a period where the loan balance exceeds the vehicle's actual cash value. This is known as being "upside down" or having negative equity. If the vehicle is totaled in an accident or stolen during this period, the customer's auto insurance only pays the actual cash value — leaving the customer responsible for the remaining loan balance. GAP coverage bridges that gap, protecting the customer from an out-of-pocket loss that can amount to thousands of dollars.
GAP is particularly relevant in the used car market for several reasons. Used vehicle buyers often finance at higher loan-to-value (LTV) ratios, meaning they start with less equity in the vehicle. Longer loan terms, which are common in used car financing, extend the period of negative equity. Additionally, used vehicles tend to depreciate differently than new cars, creating more situations where the loan balance exceeds the vehicle's value. All of these factors make GAP coverage a genuinely useful product for used car buyers — and one that is relatively easy to present in the F&I office.
For dealers, GAP represents strong F&I income with favorable economics. The wholesale cost of GAP products is typically low relative to the retail price, creating healthy per-unit margins. GAP is also eligible for reinsurance in most programs, meaning the dealer can participate in underwriting profit beyond the initial sale. High-performing F&I departments treat GAP as a standard part of the menu presentation on every financed deal.
Find out how much more you could be earning on every GAP product you sell.