1.No deductible. Under the auto insurer's GAP policy, consumers must pay a deductible when they file a claim. The dealership's GAP policy has no deductible.
2. No impact on insurance rates. The more claims consumers have against their auto insurance policies, the more the insurer raises their rates. Claims against dealership GAP policies do not affect auto insurance premiums.
3. No risk of cancellation. Auto insurers can cancel policies if consumers file one too many claims. Not true with claims against dealership GAP policies.
4. Freedom to switch insurers. If consumers buy from the dealership, they can switch auto insurers without losing GAP coverage. But if consumers want to maintain their insurer's GAP coverage, they must stick with that insurer over the term of the vehicle loan.
5. Upside-down trade-ins. Often, a dealership will roll the amount the customer still owes on a trade-in into the loan on a new vehicle. If the new vehicle is totaled or stolen, the dealership's GAP policy pays the difference between cash value of the vehicle and the balance of the loan — including the negative equity on the trade-in. But sometimes insurance companies don't cover the negative equity on the trade-in in GAP coverage.
6. Replacement vehicle. If consumers get GAP coverage from the insurer and the vehicle is totaled, the insurance company is more likely to fix the vehicle than to total it.