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How GAP Coverage and Extended Warranties Can Help You Save

What you'll learn: How to save money with GAP coverage and extended warranties


A new car can take up a sizable chunk of your budget. But to keep yourself on firm financial ground when you do decide to purchase your dream car, you need to think beyond your monthly loan and insurance payments. There are two important protections that could help you save a bundle on your next car purchase: GAP (Guaranteed Asset Protection) coverage and an extended warranty coverage plan. Both are designed to cover your costs in case of the unexpected. GAP coverage will help you pay off your loan if your car is totaled and an extended warranty coverage plan can help make those expensive repair bills more affordable.

Let's take a look at what these two coverage plans do, and how they can help you save money.

Why do I need GAP coverage?

If your car is totaled, your car insurance plan will typically pay replacement value. And while it sounds great, you might find that you owe more on your vehicle loan than the actual value of the car.

The situation isn't as uncommon as you might think. A new car loses value the minute you drive it off the lot, and if you’ve made a small downpayment or have a long loan term, there could be a sizable difference between your car's value and the remaining balance on your vehicle loan. While you may wind up with enough cash to replace your car with an equivalent vehicle, you could still be stuck paying off the loan on a vehicle that doesn't exist.

That's where GAP coverage comes in. It pays the difference between what your insurance agency will give you for your car and what you owe on your car. Meaning, your GAP protection can help you avoid paying off the remaining difference on your vehicle loan for a car you don't have. And while the car dealership may encourage you to buy GAP coverage for a hefty price, you can usually find it at a reasonable cost if you shop around.

PenFed offers GAP ADR**, a plan that includes both GAP coverage and auto deductible reimbursement—protection that will pay your auto insurance deductible (up to $500 per incident) if you're in an accident. GAP ADR starts at $399* and can easily be added to PenFed auto loans.

Why do I need an extended warranty?

You probably already know what an extended warranty is for. Once your manufacturer's warranty is up, the extended warranty kicks in to provide long-term coverage for any car problems you may run into. And while you may feel secure in a brand new car, they can have mechanical problems occur from time to time, just like a used car would. When you run into those problems after your initial warranty has expired, an unexpected car repair bill can really put a damper on your day.

Car repairs can be pricey, and that unexpected hit to your budget could potentially put you in a situation where you might need to tap into your emergency savings. An extended warranty plan can help buffer you from those costs.

PenFed’s extended car warranty program** includes 24-hour roadside assistance and rental car reimbursement—both of which will be a big help when you run into car trouble. PenFed offers extended warranty protection for new cars, used cars, and even high mileage vehicles, starting at $995*. And if you are unable to afford the cost of the warranty coverage upfront, it can be rolled directly into your PenFed auto loan financing.

When do I need this kind of coverage?

When you consider purchasing any kind of insurance coverage, you need to assess your financial situation (can you afford to purchase the coverage?), and consider how much risk you're willing to take. For example, if you buy a new car and it gets totaled the moment you drive it off the lot, will you be able to handle paying off your car loan? You could pay for GAP coverage and not worry about it—or you could assume it's unlikely you'll get into a traffic accident that soon. However, if you can get GAP at a reasonable price, it may be worth it purely for the peace of mind.

An extended warranty is similar. If you run into a major car problem, could you afford to handle it, or would it throw you into financial chaos? If you have a cushy emergency fund, unexpected repairs are the sorts of things they can help with—but if you have a less robust emergency fund (or none at all), getting an extended warranty coverage plan can help protect your budget from unexpected expenses.

Find peace of mind with PenFed

Could you handle a major vehicle expense if you wound up having to foot one? Curb the doubt and find financial peace of mind with PenFed. Check out our GAP ADR coverage and our extended warranty plans. It's not hard to find the coverage you need at a price you can afford.

And when you’re ready to shop for that new car, make PenFed your first stop for all your vehicle financing needs.


*Rates are current as of January 27, 2017 and are subject to change without notice.

**These products are optional. GAP and Route 66 Extended Warranty are not deposits or obligations of PenFed or its affiliates. GAP and Route 66 Extended Warranty are not insured or guaranteed by any agency of the federal government. Your credit approval cannot be conditioned on whether you purchase these products. You may obtain insurance to protect your loan from an entity not affiliated with PenFed.

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