A standard auto policy pays only actual cash value if a financed vehicle is totaled — GAP insurance covers the difference when that’s less than the loan payoff.
How it works
The gap is simply the loan balance minus the vehicle’s actual cash value at the time of loss. When the ACV is lower — common early in a loan or with a small down payment — that difference is what GAP insurance covers.
What this does not include
This computes the gap at a single point in time — the actual gap shrinks as the loan is paid down and the vehicle’s value stabilizes, so this figure changes throughout the loan rather than being a one-time calculation.
How to use this calculator
- Enter the current loan payoff balance and the vehicle’s actual cash value.
Frequently asked questions
When is a gap most likely to exist?
Early in a loan with a small down payment, since new vehicles depreciate quickly while the loan balance has barely been paid down.
Does a large down payment eliminate the need for GAP insurance?
It reduces the gap significantly, and may eliminate it entirely if the down payment keeps the loan balance below the vehicle’s depreciating value throughout the loan.
Is GAP insurance the same as regular auto insurance?
No — it’s a separate add-on coverage specifically for the gap between ACV and loan payoff; standard collision or comprehensive coverage pays only the ACV.
