United Poles Federal Credit Union

6 GAP INSURANCE AND EXTENDED WARRANTIES As the finance officer goes through your final paperwork and you feel like you're signing your life away, the finance manager has two more questions for you. What about GAP insurance, and do you want to go with an extended warranty? So. Many. Questions. "But I already have auto insurance, and why do I need an extended warranty when the car already comes with a warranty? It's a car…what could go wrong?" Ah…plenty. It's not unusual for buyers, especially first- time car buyers, to confuse auto insurance with GAP insurance, but they aren't the same. It's unfortunate, but the fact is that the value of a vehicle depreciates quickly, from the moment you drive off the lot. GAP insurance can help in case of an accident in which your car is totaled by "filling in the gap" between what your car is worth (its value) and what you owe on the vehicle. If, heaven forbid, six weeks after the purchase of your new car, you find yourself in an accident and your car is totaled, GAP insurance will pick up the difference (depending on the terms of your policy, a portion of the difference up to 150 percent of the value in some cases) between what the car was worth at the time of the accident and your car loan payoff amount. Without any GAP insurance, you could be left without a car and find yourself still paying a car note as well. United Poles FCU's GAP insurance covers up to 125% of the car's value, plus pays out $1,000 toward the purchase of a replacement car if it's financed through United Poles FCU. If you purchase GAP, you will want to stick closely to your payment schedule. GAP insurance claims can be impacted by the number of Skip-a-Pays a borrower uses. United Poles FCU has limits on the number of Skip-a-Pays that can be used annually and over the life of the loan for this reason. Other issues such as late payments can also reduce the GAP insurance claim payment. If you put down a large down payment and finance the vehicle for a shorter term, say 60 months or less, GAP insurance is probably not necessary. However, if you don't put much down and/or take an extended financing term of 72 or 84 months, you may want to consider GAP because the value of the vehicle may depreciate faster than the principal decreases. Also, when contemplating whether you need GAP insurance, you may want to consider the type of vehicle you're purchasing. Keep in mind that American sedans tend to depreciate faster than popular Asian sedans, and most SUVs aren't going to depreciate as fast as a car, which is helpful to consider when trying to determine the resale value in three to five years. As for warranties, most new cars and even some used cars already come with some type of warranty. Usually, those warranties are limited by mileage and length of time you've owned the vehicle. In addition, most general warranties, depending on the package, cover only certain parts of the vehicle. On the other hand, extended warranties may help cover the cost of any malfunction over an extended period of time and mileage, depending on the extended warranty package. It may even cover items beyond the initial warranty. For example, cars are filled with technology these days. What if your navigation system goes wacky and it's not covered by the standard warranty? In some cases, your extended warranty may pick up the cost of this repair – minus any deductible, of course. We all know technology can be expensive to fix – and the technology in your car could be even more pricey to repair. Generally, you can choose a level of warranty and specify a term. For example, a platinum warranty might cover bumper to bumper, whereas a silver warranty covers most major components. Many plans cover everything beyond normal and routine maintenance. If you're going to drive the car and keep it for an extended period, an extended warranty can be good since components like technology, air conditioning and new safety features are all expensive to fix. United Poles FCU offers extended warranties and different levels of coverage through CUNA Mutual. Quotes are based on the current age and mileage of the vehicle, the desired mileage and the length of coverage. The cost is typically less than what a dealership might charge, and vehicles can be taken to the dealership or to a certified mechanic at the discretion of the owner. 10

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