Featured F&I Product: GAP

With only a few exceptions it appears that GAP coverage isn’t being embraced by F&I Managers as much as in the past—customers rolling negative equity into their new loan not withstanding. That’s worth reconsidering for a number of reasons not the least of which is that you are doing your customer a disservice by not fully explaining all that GAP does for them. First, consider their down payment. When put into percentages, is it really as much as it looks to be on the surface? Use your computer models: several have graphics that can show how long it takes for a customer to have equity in the car. Next, consider the miles driven and term of the loan. If they drive a considerable amount it offsets the cash, and they can still find themselves in a negative equity position should there be a total loss. Longer finance terms mean more finance charge. Finally, consider rate. Customers with higher finance rates won’t see equity for a good while longer than those who qualify for lower rates.

A fact customers don’t think about is automobile values. Since 2008 there has been less supply than demand for used cars. That drove used car values up and customers paid the price. As that supply meets and exceeds demand, and that will happen, those who purchased cars at inflated values, will lose out as the market value declines in response. So cash down or not, your customer may still find themselves owing more than the insurance company will pay.

If called upon to do so, could you talk about the benefits of GAP coverage for 3 minutes? Or do you run out of things to say after the obvious facts are stated? You all know what they are but do you know how often your customers have filed GAP claims? What was the average amount paid? How easy was it to file? What happens if they trade the car prior to the expiration of the GAP coverage? Real life scenarios will sell GAP coverage. While this requires some research to be done by you, your Jeram Marketing representative can also help you run down the statistics. Generally speaking the average GAP claim is $2,800. Your customer can roll that negative equity into their new car loan for an additional $50 to $60 in their 60 month loan, or add GAP for much less. We think that given the choice, your customer will opt to purchase the GAP coverage up front.