Financing a car? Beware...

My brother came in today excited about the deal he got on a pre-owned Kia today. Good mileage, nice clean SUV for a good price. He handed me the envelope they sent him home with to make the changes to his car insurance policy and I saw caught the only problem. There was a whole page contract for the purchase of GAP Insurance. Don't get me wrong, GAP Insurance is an important coverage because it pays the difference between the loan value and the value of the car if you have a total loss. It can be important if the value of the car drops faster than your balance owed. The problem is the cost that was wrapped up in the loan amount at the time of the sale - $795!! That would cover him for 75 months however buying GAP coverage through his car insurance policy was only $13 a year, basically a 90% savings! Some companies the rate can be as much as $30 a year but even that is a huge savings compared to what the company was charging through the dealership. The good news for my bro was at the bottom of the contract it gave an option to cancel within 30 days to get a full refund. Before he even left my office I helped him prepare the signed cancellation request for the $795 refund and we processed his policy change to include the Gap Protection with his car insurance.