Another Ranger gone too soon......

[D Fresh]

FRV will cover you at todays prices and will give you your sales tax and registration fees back. WIth todays inflated prices it saved my butt! Without it I would've got a check for $35,574.13 and with it I received $51,081. On my '19 it was an additional $67/year and on my '23 it's $85.00. I never thought I'd ever use until I needed it and it was worth getting an additional $16K.

Happy it worked out for you.

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[NeptuneRanger]

Thanks for clarifying Chris. What's odd is that me and @Chris M have the same company (Travelers) yet have received different info on how the endorsement works. I'm sure different companies have different stipulations. The only reason I'm thinking mine is right is because besides my agent, I also had both my total loss adjusters confirm that it has to be added on when the vehicles new, has under 500 miles on it and lasts for up to 5 years. Obviously because they paid my claim and my truck was 4 years old and this was added when I bought it new. I know when I was back east and had Commerce Mapfre insurance (that's where I originally found out about this endorsement) it worked the same.

Think of policy contracts as wine, each has its own vintage. Travelers may have had that endorsement in an earlier version of their offerings and then discontinued or modified it in their newer offerings. You were grandfathered in.

 

[Langwilliams]

It's not really fair to compare gap insurance to vehicles purchased now vs pre COVID. Values shot down as soon as you drove off the lot an if you rolled negative equity or had a low down payment many loans required it for approval.

 

[JimG_AZ]

It's not really fair to compare gap insurance to vehicles purchased now vs pre COVID. Values shot down as soon as you drove off the lot an if you rolled negative equity or had a low down payment many loans required it for approval.

I disagree. Pre-covid or now, GAP coverage being required indicates the same issue - your about to enter a negative equity situation. If you need to bail out of this situation, you are probably heading towards a financial disaster. So, if the buyer really thinks this is a good idea and the finance guy is saying that GAP is required for loan approval, I would think one of the following is true:

1. The lender is concerned that the buyer may not be able to pay the loan. That should be a flashing neon light to the buyer that it may be time to rethink this purchase.
2. The finance guy is not being totally honest with the buyer and is trying to upsell a premium service.

So which one is it...who knows? IMO, the best thing the buyer can do is tell the finance guy you do not agree with the terms. Just tell the finance guy that if they really want to make this sale, they are eating the cost of the GAP coverage. This would certainly add a bit of excitement in the ole finance office. What's funny is I'll bet the topic of mandatory GAP would come up after the finance guy made the sales pitch for the extended warranty and the service plan.

 

[AzScorpion]

I disagree. Pre-covid or now, GAP coverage being required indicates the same issue - your about to enter a negative equity situation. If you need to bail out of this situation, you are probably heading towards a financial disaster. So, if the buyer really thinks this is a good idea and the finance guy is saying that GAP is required for loan approval, I would think one of the following is true:

1. The lender is concerned that the buyer may not be able to pay the loan. That should be a flashing neon light to the buyer that it may be time to rethink this purchase.
2. The finance guy is not being totally honest with the buyer and is trying to upsell a premium service.

So which one is it...who knows? IMO, the best thing the buyer can do is tell the finance guy you do not agree with the terms. Just tell the finance guy that if they really want to make this sale, they are eating the cost of the GAP coverage. This would certainly add a bit of excitement in the ole finance office. What's funny is I'll bet the topic of mandatory GAP would come up after the finance guy made the sales pitch for the extended warranty and the service plan.

It's similar to when they were letting people take out a second mortgage to use as their downpayment back before the housing crash. You probably can't afford the house you're buying If you need a second mortgage for the downpayment!

That was very common here in AZ. When I bought this house (short sale) he had a $25K second mortgage for that reason.

 

[D Fresh]

It's not really fair to compare gap insurance to vehicles purchased now vs pre COVID. Values shot down as soon as you drove off the lot an if you rolled negative equity or had a low down payment many loans required it for approval.

I've financed more than my share of cars. I've never heard of a loan requiring gap once. Pre or post Covid.

 

[JimG_AZ]

It's similar to when they were letting people take out a second mortgage to use as their downpayment back before the housing crash. You probably can't afford the house you're buying If you need a second mortgage for the downpayment!

That was very common here in AZ. When I bought this house (short sale) he had a $25K second mortgage for that reason.

Absolutely agree.

 

[Langwilliams]

I disagree

I've financed more than my share of cars.

Disagree all you want but it's a FACT cars aren't depreciating like they did pre covid.

I had a brief period as a car salesman (I use that that loosely since I didn't last long) an occasionally you get the situation where negative equity can't be avoided. It's probably less frequent now with cars holding their value better. A guy came in in a 1 year old vette on a 3 year lease with his pregnant girl friend. It's usually a series of bad decisions that leads to a negative situation. This guy had a choice of making two car payments an insurance payments or rolling some loss into a new car an having an inflated payment. It's rare for someone to drop 5 K out of pocket just to clear the books on the old payment when gap insurance is around 25 bucks a month.

Also had a pharmaceutical sales rep roll in in a 2 year old car with 120K miles on it an a ton of negative equity. it does happen.
My kid's MB lease is up in Sept an he's buying it even if he doesn't want to keep it to resell since it's worth so much more than the buy out. The dealer may offer him the difference, we'll see.

 

[D Fresh]

Disagree all you want but it's a FACT cars aren't depreciating like they did pre covid.

I had a brief period as a car salesman (I use that that loosely since I didn't last long) an occasionally you get the situation where negative equity can't be avoided. It's probably less frequent now with cars holding their value better. A guy came in in a 1 year old vette on a 3 year lease with his pregnant girl friend. It's usually a series of bad decisions that leads to a negative situation. This guy had a choice of making two car payments an insurance payments or rolling some loss into a new car an having an inflated payment. It's rare for someone to drop 5 K out of pocket just to clear the books on the old payment when gap insurance is around 25 bucks a month.

Also had a pharmaceutical sales rep roll in in a 2 year old car with 120K miles on it an a ton of negative equity. it does happen.
My kid's MB lease is up in Sept an he's buying it even if he doesn't want to keep it to resell since it's worth so much more than the buy out. The dealer may offer him the difference, we'll see.

I think that my point is that I've always used vehicle financing responsibly.

Basically gap insurance has always been for folks stretching beyond their means.

 

[Langwilliams]

I think that my point is that I've always used vehicle financing responsibly.

Basically gap insurance has always been for folks stretching beyond their means.

Understood. Some people get new car fever an responsible thinking goes out the window.
One reason I didn't last selling cars is it was HARD to encourage someone to sign the line on something they have no business buying. You see a bad decision they see a shinny new Camaro they'll score chicks in or impress their friends in. BUT sale no commission.

Gap is a good tool when you're in a pinch an need a bigger vehicle for family or other reasonable events but can't buy your way out.

 

[JimG_AZ]

Disagree all you want but it's a FACT cars aren't depreciating like they did pre covid.

I had a brief period as a car salesman (I use that that loosely since I didn't last long) an occasionally you get the situation where negative equity can't be avoided. It's probably less frequent now with cars holding their value better. A guy came in in a 1 year old vette on a 3 year lease with his pregnant girl friend. It's usually a series of bad decisions that leads to a negative situation. This guy had a choice of making two car payments an insurance payments or rolling some loss into a new car an having an inflated payment. It's rare for someone to drop 5 K out of pocket just to clear the books on the old payment when gap insurance is around 25 bucks a month.

Also had a pharmaceutical sales rep roll in in a 2 year old car with 120K miles on it an a ton of negative equity. it does happen.
My kid's MB lease is up in Sept an he's buying it even if he doesn't want to keep it to resell since it's worth so much more than the buy out. The dealer may offer him the difference, we'll see.

If you are basing the car depreciation on MSRP, then I'll agree with you that cars are depreciating at a lower rate than pre-covid. The big difference is that many (maybe most) had to pay MSRP plus dealer adds with little to no incentives. That pushed the real price of a new car up. So, if may appear that todays new cars are holding their value better, that may not be true. If there is a market correction with new car pricing, we will probably see the number of people who purchased cars from '21 on with negative equity go up. If this happens, the car manufacturers and dealers will get hit hard because many will keep their cars longer.

I agree with you that most (not all) of the people with negative equity are due to bad financial decisions. Sure, sometimes you can have a situation arise where the current vehicle is inadequate. This just happened to some relatives of ours when my wife's niece found out she was pregnant with twins. All of a sudden, the Highlander was too small and they needed a mini van.

 

[Langwilliams]

If you are basing the car depreciation on MSRP, then I'll agree with you that cars are depreciating at a lower rate than pre-covid. The big difference is that many (maybe most) had to pay MSRP plus dealer adds with little to no incentives. That pushed the real price of a new car up. So, if may appear that todays new cars are holding their value better, that may not be true. If there is a market correction with new car pricing, we will probably see the number of people who purchased cars from '21 on with negative equity go up. If this happens, the car manufacturers and dealers will get hit hard because many will keep their cars longer.

I agree with you that most (not all) of the people with negative equity are due to bad financial decisions. Sure, sometimes you can have a situation arise where the current vehicle is inadequate. This just happened to some relatives of ours when my wife's niece found out she was pregnant with twins. All of a sudden, the Highlander was too small and they needed a mini van.

That "twins" situation happened to me. Had a regular cab ranger and a 5 seat sedan. Had two kids an then twins came along. Had to trade both in on a mini van an buy myself a beater for a work car.

The limited time I was at a dealership they made their big profit on impulse buyers. They want something flashy an trade in a perfectly good vehicle for some bling. Six months later it's not meeting their needs an they're back. Rolling negative each time. I'd guess 25% of people were in positive trade situations. Credit was loose back then so it may be totally different now.

 

[JimG_AZ]

...The limited time I was at a dealership they made their big profit on impulse buyers. They want something flashy an trade in a perfectly good vehicle for some bling. Six months later it's not meeting their needs an they're back. Rolling negative each time. I'd guess 25% of people were in positive trade situations. Credit was loose back then so it may be totally different now.

Wow! Just crazy that people are this reckless financially.

 

[Langwilliams]

Wow! Just crazy that people are this reckless financially.

This is why they throw that stat out "40% of Americans don't have $400 to pay an emergency repair bill"

https://fortune.com/2023/05/23/infl...cant-cover-emergency-expense-federal-reserve/

There was a saying: poor people think money is to be spent, middle class think money is to be managed, wealthy people think money is to be put to work.

 

[JimG_AZ]

This is why they throw that stat out "40% of Americans don't have $400 to pay an emergency repair bill"

https://fortune.com/2023/05/23/infl...cant-cover-emergency-expense-federal-reserve/

There was a saying: poor people think money is to be spent, middle class think money is to be managed, wealthy people think money is to be put to work.

I could not agree more. There are so many people in financial trouble.

My wife and I wised up @ 15 years ago. We had a boat, travel trailer, off-road toys, and she horses that we were boarding. We were living paycheck to paycheck and we realized this was not sustainable. We had way too much debt! One of our main goals was to put both kids through college. and we realized something had to change. So, around 15 years ago, we sold all the toys, and just about ended up giving the horses away. At least the boat, camper and off-road toys had resale value. So, we didn't do too bad on selling those, but we lost our shirts on the horses. It took a while to bail out of that debt, but once we got rid of the horse boarding bills and Arabian Horse show charges, we were able to regain financial control. At the time, I was not too happy about selling my toys. but looking back, that was the smartest financial decision we ever made. It is a huge relief when you get hit with a major bill, and the money to cover it is in the saving account.

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