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Guaranteed auto protection (GAP) insurance helps car owners protect themselves from losing money should their vehicle become damaged beyond repair. GAP insurance is meant to ensure that the car owner is guaranteed to receive the full value for the original price of the vehicle even with depreciation.
While this provision is great for protecting your overall financial status, problems have arisen with GAP fees stemming from certain lenders failing to meet their obligations. When lenders fail to meet their obligations, it can cause further financial problems for those hoping to recuperate money on their totaled vehicle.
Auto lenders have an obligation to pay the GAP fees owed to their customers. When they fail in their responsibilities, you have the option to seek legal action to resolve the conflict.
What Is GAP Insurance?
This is a type of coverage that the lender can provide when the customer is financing a car. While it acts similarly to insurance, it originates from the bank offering the loan. The consumer pays a fee, and in exchange the lender agrees to forgive any gap that might exist between the true value of the automobile and the amount left on a car loan.
If your vehicle has been stolen, or damaged beyond repair in an accident, your insurance company should compensate you for the value of the vehicle. However, in some cases you might still be paying off your loan and the car insurance will not cover the full amount that you owe. The GAP insurance should cover the balance of the money you owe on your loan.
What Does GAP Insurance Cover?
If you are the original loan holder or lease holder of the vehicle, you are eligible to sign up for GAP insurance. It is not a requirement, but can be helpful should you run into problems in the future. Those that should purchase it include:
- Those who made a down payment of less than 20 percent.
- When a vehicle has been financed for 60 months or longer.
- Those who are leasing the vehicle, as carrying GAP insurance is required for a leasing agreement.
- Anyone who has purchased a vehicle that depreciates more quickly than average.
- Individuals who have rolled over negative equity from an old auto loan into their new one.
It should be noted that most of the compensation you will receive for any accidents or other problems with your vehicle will come through your insurance. GAP coverage is only meant to prevent you from having to use your own money if your car is totaled while you are still making loan payments. GAP insurance will not cover:
- Repairs to the damaged or totaled vehicle.
- Value of the vehicle or balance of the loan if the vehicle is repossessed.
- The cost of a rental vehicle while your own vehicle is being repaired.
- Diminished value of your vehicle post-accident.
- Down payment for a replacement vehicle.
- Extended warranties added to your car loan.
What Are Potential Problems with GAP Insurance?
When you pay your car loan off early, you are entitled to a refund from the fee that you paid upfront. Unfortunately, there have been lenders who have not been accommodating.
When a lender of any size refuses to refund your money or pay out the fees you have already paid, they have violated the law. You have the right to file a claim against the lender for breach of contract. As part of a claim, you can seek the coverage that the GAP insurance should have paid out, along with additional damages you sustained in the incident.
You can also seek additional economic expenses incurred during this conflict, including attorney’s fees and court costs, depending on the details of the situation. A plaintiff may have non-financial demands as well, including guarantees that the lender always fulfills its GAP obligations going forward. A consumer protection lawyer can help determine the merits of your case and the best legal path forward.
PA Consumer Protection Lawyers at East End Trial Group Will Fight on Your Behalf if an Auto Lender Has Failed to Refund GAP Fees
If you are encountering a lender that is refusing to pay you the GAP money that they owe you, our PA consumer protection lawyers at East End Trial Group can help. Call 412-223-5740 or contact us online to schedule a free consultation today. Located in Pittsburgh, we serve clients throughout Pennsylvania.