It’s called the “gap.” It’s the difference between the Amount Owed on your Retail Installment Sales Contract/Lease Agreement and the Actual Cash Value of your vehicle at the time of a Total Loss.
The Amount Owed does not include missed payments, payment extensions, deferred payments, accrued interest, late fees, disposition fees, penalty fees, early termination fees or ﬁnance charges incurred after the date of loss. Also, if the insurance company valuation used to calculate the Actual Cash Value is less than 90% of the NADA value of your vehicle, the NADA value will be used in determining the “gap” amount waived (which means a smaller amount may be waived).
Depending on the plan you purchase, amounts ﬁnanced in excess of 120% or 150% of the Manufacturer’s Suggested Retail Price (MSRP) of your new car or NADA retail value of your used car will not be waived and you will owe these over-ﬁnanced amounts even after a Total Loss. Please read your contract carefully to make sure you understand these limitations.
If your car is determined to be a Total Loss, this “gap” could translate into thousands of dollars that you would still owe after the settlement from the auto insurance company. The Plan excludes total loss claims denied by your automobile insurance company. This is an optional waiver product and not a product of insurance. It is not required for you to obtain ﬁnancing for the purchase or lease of a vehicle.