Do I need gap insurance when I finance a new car?

Gap insurance is worth it when you owe more on your car loan or lease than the car is worth, which is common in the first few years of financing. Cars depreciate fast — often 20% in the first year — but your loan balance falls slowly, so if the car is totaled or stolen, your regular collision or comprehensive coverage pays only the depreciated actual cash value, which can be thousands less than your remaining loan. Gap insurance (guaranteed asset protection) covers that difference so you're not stuck paying off a loan on a car you no longer have. You likely need it if you made a small down payment, financed for 60 months or longer, or rolled negative equity from a trade-in into the loan. Once you owe less than the car's value, you can drop it. Leases often include it automatically.