Why Is The Dealer Pushing GAP Insurance Even When I'm Making A Big Downpayment?

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As Jalopnik’s resident car-buying expert and a professional car shopper, I get emails. Lots of emails. I’ve picked a few of your questions and will try to help out. This week we are discussing why dealers push GAP insurance and what to do if the used car you bought didn’t come with a feature it had been advertised as having.

First up, how come the dealer is doing the hard sell with GAP insurance if you are making a large downpayment?

“I recently bought a new Honda CR-V and took advantage of the 1.9 percent APR special. I also put $10,000 down to keep my payments reasonable. When I go to sign the contract I see a line item added for GAP insurance for $599. I ask the finance manager why this is in the contract and he tells me that he has to put that in all the agreements to protect people from being underwater on their loan. This sounds like a bunch of nonsense, I told him that I am putting $10k down and I don’t want that. He gives me some line about how he isn’t allowed to take it out and I threaten to kill the deal. After some back and forth, he offers me a new contract without the GAP. Honestly, I’m not too surprised by this stuff but why would anyone need GAP insurance if they are putting such a large amount of money upfront? Wouldn’t you always have positive equity?”


For readers not familiar with GAP insurance, the acronym stands for Guaranteed Asset Protection. If your car is totaled in an accident and your loan balance is greater than your car insurance payout, the GAP policy covers the amount — the gap — between those two numbers. For a more detailed explanation including how to shop for GAP coverage if you think you need it, check out this post from Your Auto Advocate.

You are absolutely correct that putting $10,000 down on what I am assuming to be a car that retails for around $30,000 would negate any reason for GAP insurance. The is especially true on something like a CR-V that tends to hold its value pretty well. The dealer obviously knows this, and the simple fact is that GAP coverage is an easy profit-maker for the dealer. I’m going to guess that this particular dealer probably sneaks that $599 fee into every contract, hoping that most people don’t catch it. If they do that over hundreds or even thousands of deals, that adds up. You were right to catch that and question it.


Next up, what can you do if you bought a used car advertised as having with a certain feature, only to find out after the sale that it doesn’t have that feature?

“I just bought a 2017 Lexus ES 350. The description listed the car as having a Mark Levinson stereo, but the car does not. The dealership says the third party that listed the car is at fault for including that info. I saw the listing through Capital One Auto Finance, and also CarNow, and the stereo was listed on each of the lists of what the car had. My mistake was not realizing it until after I’d signed the contract. Is there anything I can do?”


This is one of those unfortunate situations where listings on third-party websites don’t accurately reflect the car’s actual equipment. However, it is usually the dealer who is responsible for providing the details on those sites. What I have seen is that someone gets a bit sloppy with the copy/paste and drops in details on these listings that don’t actually line up with the car. You might have a case for false advertising, and it could be worth contacting a consumer protection attorney. This could be a tough case, though, as dealer ads usually have a disclaimer that says something along the lines of “...we are not responsible for errors” or some such. That is why it’s critical for buyers shopping for a specific feature confirm that the option is on the car prior to signing any contracts.

Got a car buying conundrum that you need some assistance with? Email me at tom.mcparland@jalopnik.com!