Does Tesla Offer Gap Insurance? Why It’s A Scam And How To Avoid It!

Tesla gap insurance is a type of coverage that protects you from paying the difference between the actual cash value of your Tesla and the amount you owe on your loan or lease if your car is stolen or totaled.

Gap insurance can save you thousands of dollars in case of a total loss, especially if you have a high-interest rate, a long-term loan, or a low down payment.

Related: Tesla Insurance vs Geico

What is Tesla Gap Insurance?

Tesla offers its own version of gap insurance called Guaranteed Asset Protection (GAP). This coverage pays up to $50,000 above the actual cash value of your Tesla if it’s totaled or stolen.

It also covers your deductible of up to $1,000. GAP is available for all new and certified pre-owned Teslas financed through Tesla Finance.

Tesla GAP insurance is optional for most customers, but it is automatically included in the financing for Tesla leases.

You can purchase Tesla GAP insurance at the time of vehicle delivery or within 30 days after delivery.

The cost of Tesla GAP insurance varies depending on your state and vehicle model.

How Does Tesla Gap Insurance Work?

Tesla gap insurance works by paying the difference between what you owe on your car and what your car is worth if it’s stolen or becomes a total loss.

For example, suppose you buy a new Tesla Model 3 for $40,000 with a $4,000 down payment and a 60-month loan at 5% interest.

After one year, you still owe $31,000 on your loan, but your car’s actual cash value has dropped to $28,000.

If your car is totaled in an accident, your regular insurance will only pay you $28,000, leaving you with a $3,000 gap.

If you have Tesla GAP insurance, it will cover the $3,000 gap plus your deductible of up to $1,000.

Evaluating the Need for Gap Insurance

Determining whether you need gap insurance for your Tesla or any vehicle purchase requires a careful evaluation of various factors. Here are some key considerations:

1. Loan or Lease Terms

If you financed your Tesla or are leasing it, gap insurance may be more relevant since the outstanding balance on the loan or lease is likely to exceed the vehicle’s ACV.

2. Vehicle Depreciation

Electric vehicles, including Teslas, can depreciate at different rates compared to traditional gasoline-powered cars. Understanding the depreciation rate of your specific Tesla model will help assess the potential gap between the loan balance and the vehicle’s ACV.

3. Down Payment

The size of your down payment can impact the need for gap insurance. A larger down payment may reduce the gap between the loan balance and the car’s ACV, potentially decreasing the necessity for gap coverage.

4. Resale Value

If you plan to sell or trade-in your Tesla before paying off the loan or lease, consider the potential impact on your loan balance. Depending on the depreciation rate, the ACV at the time of selling may not be sufficient to cover the outstanding amount owed.

Who Needs Tesla Gap Insurance?

Tesla gap insurance is recommended for anyone who finances or leases a new or certified pre-owned Tesla. Teslas are known for their high depreciation rates, which means they lose value faster than other cars.

According to Edmunds.com, a Tesla Model 3 loses about 10% of its value in the first year and 40% in the first three years.

This means that you are likely to owe more on your loan or lease than what your car is worth for most of the term.

Tesla gap insurance is especially important if you have any of the following factors:

• A high-interest rate
• A long-term loan (more than 48 months)
• A low down payment (less than 20%)
• A trade-in with negative equity (you owe more than what it’s worth)
• A high-mileage or customized vehicle

How Much Does Tesla Gap Insurance Cost?

The cost of Tesla GAP insurance depends on your state and vehicle model. According to Tesla’s website, GAP insurance costs between $399 and $599 for most customers².

However, some customers have reported paying as low as $200 or as high as $900 for GAP insurance⁴. The cost of GAP insurance is usually added to your loan or lease payment and spread over the term.

Benefits of Tesla Gap Insurance

The benefits of Tesla GAP insurance are:

• It protects you from paying the difference between what you owe on your car and what it’s worth if it’s stolen or totaled
• It covers your deductible up to $1,000
• It is available for all new and certified pre-owned Teslas financed through Tesla Finance
• It is automatically included in the financing for Tesla leases
• It can be purchased at the time of delivery or within 30 days after delivery
• It can be canceled within 30 days of purchase for a full refund

Drawbacks of Tesla Gap Insurance

The drawbacks of Tesla GAP insurance are:

• It costs between $399 and $599 for most customers
• It may not be necessary if you have a low-interest rate, a short-term loan, a large down payment, or positive equity in your trade-in
• It may not cover the entire gap if you owe more than $50,000 above the actual cash value of your car
• It may not be available in some states

Is Tesla’s Gap Insurance worth it?

Tesla’s gap insurance can be a worthwhile investment if you are financing or leasing a new or expensive Tesla vehicle that may depreciate faster than you pay off your loan or lease.

This can help you avoid paying a large amount of money out of pocket if your car is totaled or stolen before you finish paying it off.

However, there are some factors to consider before buying gap insurance from Tesla or any other provider:

1. The cost of gap insurance

The price of gap insurance may vary depending on the provider, the policy, and the vehicle. Generally speaking, buying gap insurance from your car insurance company may be cheaper than buying it from a lender or dealership³. However, you should compare different quotes and options before making a decision.

2. The duration of gap insurance

Gap insurance only lasts as long as you have a loan or lease on your car. Once you pay off your loan or lease, or if you sell or trade-in your car, your gap insurance will end.

Therefore, you should consider how long you plan to keep your car and how quickly you will pay off your loan or lease before buying gap insurance.

3. The value of your car

Gap insurance is only useful if your car’s ACV is lower than what you owe on your loan or lease. If your car’s value is higher than what you owe, or if you have enough equity in your car, you may not need gap insurance.

Therefore, you should check the current value of your car and compare it with your loan or lease balance before buying gap insurance.

4. The deductible of your collision or comprehensive coverage

Gap insurance does not cover the deductible of your collision or comprehensive coverage, which is the amount you have to pay out of pocket before your insurance pays for the rest of the claim.

Therefore, if you have a high deductible, you may still have to pay a significant amount of money even with gap insurance.

You may want to lower your deductible or save some money for emergencies before buying gap insurance.

How to Get Tesla Gap Insurance?

You can get Tesla GAP insurance by contacting Tesla Finance at the time of vehicle delivery or within 30 days after delivery.

You will need to provide your vehicle identification number (VIN), loan or lease agreement number, and proof of insurance. You can also cancel your GAP insurance within 30 days of purchase for a full refund.

Alternatively, you can get gap insurance from other sources, such as:

• Your regular car insurance company
• Your bank or credit union
• An independent gap insurance provider

However, these options may have different terms and conditions than Tesla GAP insurance. For example, some gap insurance policies may not cover your deductible or may have a lower limit than $50,000.

Therefore, it is important to compare different quotes and read the fine print before buying gap insurance.

Claim Process with Tesla Gap Insurance

If you have a total loss or theft claim with your regular car insurance company, you will need to contact Tesla Finance to file a claim with GAP Insurance. You will need to provide the following documents:

• A copy of the police report
• A copy of the settlement check from your regular car insurance company
• A copy of the loan or lease payoff statement from Tesla Finance
• A copy of the GAP waiver agreement

Tesla Finance will review your claim and pay the gap amount directly to your lender or lessor.

How to Cancel Tesla Gap Insurance?

You can cancel your Tesla GAP insurance within 30 days of purchase for a full refund by contacting Tesla Finance. You will need to provide your VIN and loan or lease agreement number.

If you cancel after 30 days, you may receive a prorated refund based on the remaining term of your loan or lease.