Buying a car is one of the most challenging investment decisions most consumers make. Auto shoppers weigh factors such as price, fuel efficiency, safety, personal needs and taste. But before you make your choice, be sure to also consider “auto depreciation.”
In his article “Best & Worst Depreciating Vehicles,” MSN Autos writer Chuck Tannert offers some sage advice regarding what determines the value of a vehicle, as well as some insight as to which autos are holding their value and which ones are not. To minimize the effect of depreciation, be sure to take Chuck’s words to heart before shopping for your next auto.
If you’re taking an auto loan with a small down payment, you should also consider “GAP” insurance. Basically, it’s insurance that covers the difference between what your vehicle is worth, and how much you owe on it.
For example: you loan $25,000 for a car, and a few months later it’s only worth $20,000 (depreciation). If your car is totalled in an accident, your insurer would pay you the $20,000 that it’s worth — leaving you responsible for the nearly $5,000 remaining on your loan! GAP insurance would cover that $5,000 difference. If you’re “rolling over” debt from a previous auto loan, the difference can be much greater, making GAP insurance an even wiser choice.
GAP insurance is offered by most lenders, as well as many insurance agents. When you’re shopping for auto loan rates, be sure to also inquire about GAP insurance costs, as they can differ by hundreds of dollars. Here at Indian River Federal Credit Union, we offer GAP insurance for $200, and our auto loan rates are currently as low as 4.74%.
For links to information on vehicle safety ratings, fuel efficiency, Kelly Blue Book Values and more, visit the Auto Buying page of the IRFCU Vault section of our website.
