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Gap Calculation Formula:
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Gap auto coverage, also known as gap insurance, covers the difference between what you owe on your auto loan and the actual cash value (ACV) of your vehicle if it's totaled or stolen. This is particularly important in California where vehicle depreciation can be significant.
The calculator uses a simple formula:
Where:
Explanation: If the result is positive, you have a gap that would not be covered by standard insurance. If negative, your insurance payout would exceed your loan balance.
Details: California drivers face rapid vehicle depreciation, making gap coverage essential for those with new cars, long loan terms, or small down payments. It protects against financial loss when insurance payouts fall short of loan balances.
Tips: Enter your current auto loan balance and the estimated actual cash value of your vehicle. Both values should be in USD. The calculator will show you the potential gap amount.
Q1: Who needs gap coverage in California?
A: Anyone with a new vehicle, long loan term (60+ months), small down payment (less than 20%), or who leases a vehicle should consider gap coverage.
Q2: Is gap coverage required by California law?
A: No, gap coverage is optional in California, but it's highly recommended for many borrowers.
Q3: How is ACV determined?
A: Insurance companies determine ACV based on your vehicle's make, model, year, condition, mileage, and local market values in California.
Q4: Does gap coverage cover my deductible?
A: Standard gap coverage typically doesn't cover deductibles, but some policies offer "loan/lease payoff" coverage that may include it.
Q5: When should I cancel gap coverage?
A: You can typically cancel gap coverage when your loan balance is less than your vehicle's actual cash value, or when you've paid off your loan.