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In NL, what should I know about GAP insurance for car loans?
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Car Loan Glossary • nl

In NL, what should I know about GAP insurance for car loans?

In Newfoundland and Labrador, GAP (Guaranteed Asset Protection) insurance is an optional financial product designed to cover the difference between your vehicle's actual cash value (ACV) at the time of a total loss and the outstanding balance of your car loan. New vehicles in Canada, including NL, depreciate rapidly, often leaving a significant 'gap' where your standard auto insurance payout (based on ACV) is less than what you still owe the lender. This is particularly relevant in the 2025 market with potentially longer loan terms and higher interest rates, which can exacerbate the loan shortfall.

Why this matters: Without GAP insurance, if your car is stolen or declared a total loss, you could be left owing thousands of dollars on a vehicle you no longer possess, potentially harming your credit rating and creating an unexpected financial burden. It's crucial to distinguish GAP from replacement-value auto insurance; while the latter might cover the cost of a new vehicle, GAP specifically addresses the loan deficit. Always compare the cost and coverage of GAP insurance offered by lenders or dealerships with any similar endorsements available through your primary auto insurance provider in NL to ensure you're getting the most comprehensive and cost-effective protection.

References:

Related Topics: nl province topic

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