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See how much more you would owe on a car loan than the car is worth, month by month, and when gap insurance stops being needed.
Cars lose value fastest in the first years, while a loan pays down slowly — especially with a small down payment, a long term or taxes and fees rolled into the loan. If the car is totaled or stolen, insurance pays its current value, and you still owe the rest of the loan. Gap insurance covers that difference.
Loan balance after m months = standard amortization of (Price − Down payment + Financed fees). Car value = Price × (1 − Year-one depreciation)^(m/12, first 12 months) × (1 − Later depreciation)^((m − 12)/12). Gap = Loan balance − Car value.
A $35,000 car with $3,000 down and $2,500 of fees financed is a $34,500 loan — $588.19 a month at 7% for 72 months. After one year you owe about $29,705 on a car worth about $28,000, a $1,705 gap. You owe more than the car is worth until month 29.
People who put less than about 20% down, finance for 60 months or longer, roll taxes, fees or negative equity into the loan, or drive a model that depreciates quickly.
Many auto insurers offer it as an add-on, often for less than a dealer charges. Leases frequently include it already — check your contract.
Once you owe less than the car is worth. The calculator shows the month that happens on your numbers.