There are times when you have to sell your car quickly, whether you own it free and clear or are still making payments on it. You might be making a big move or your life’s circumstances may be changing, such as a growing family or a change in your employment status. Whatever the reason might be, there are all kinds of mistakes to avoid when selling a car. In this article, we want to make sure you know how to avoid the number-one mistake car sellers make:
Failing to cancel your GAP insurance, service contract, or other add-on products that may have been included when you bought the car.
GAP stands for Guaranteed Asset Protection, it’s an additional product of insurance protection that’s very handy when you first purchase a vehicle, whether new or used, and financed your purchase with an auto loan. If you didn’t put much money down on the vehicle, it’s not uncommon to be “upside down” or have negative equity in the vehicle, meaning you owe more money on the car than it’s worth. For new cars, this is because they depreciate very rapidly when you first drive it off the lot, to the tune of 20% in the first year alone. If something happens and the car gets totaled, what your auto insurance company will pay out could be thousands of dollars less than what you still owe on the vehicle, which is a big “gap.” This is when GAP insurance makes a lot of sense.
Here’s how it works: The dealership has relationships with various companies that provide GAP insurance. The come up with an amount that the GAP insurance will cost, and then this amount is paid in full up-front and rolled into your finance contract, meaning that for you, the GAP insurance cost is based on your financing terms and spread out over the life of the loan.
If you decide you need to sell your car, you’ll either be paying off the loan as part of the transaction, or rolling it into your next financing contract. Remember that the full cost of your GAP insurance was rolled into your original finance contract, and its price was figured on how much protection you would need over the life of the loan. When you sell the car before the end of the loan, part of what you’re paying off early is the full cost of GAP insurance that you haven’t used. The GAP insurance should be cancelled and you should get a pro-rated refund. This is the same as if you paid for a full year of regular car insurance, then decided to sell your car and not get a new one. You cancel your insurance policy and get a pro-rated refund of the unused portion.
In a perfect world, this would all just happen automatically, but it’s not a perfect world and you should be pro-active in canceling your GAP insurance and requesting your refund. In your finance contract, you should be able to find a section about the GAP coverage, and the fine print should include a clause that explains the cancellation and refund process. We’ve heard unfortunately stories from people where they really had make noise to get this taken care of. If you worked with a reputable dealership who cares for its customers, they should be willing to help you go through this process.
If you want to take the process on yourself, you’ll want to verify the mileage on the car, so take it back to the dealership where you bought it and ask them to prepare an odometer disclosure statement. When your loan is paid off, make sure you have copies from the lending financial institution that says everything was paid in full – the loan and any add-on products like GAP insurance. Now look at your original finance contract and find out the name of the company that provided your GAP insurance coverage. Contact them and find out what they need in order to cancel your GAP insurance, such as filling out and sending in cancellation forms along with your odometer disclosure and loan payoff documentation. Do all of this as soon as possible after you sell the car.
It’s also important to understand that GAP insurance isn’t the only add-on-product you should be paying attention to when you go to sell your car, whether you have a loan out on it or not. Go through your paperwork with a fine-toothed comb and look for the following:
The cost of any service contract, which helps pay for unexpected repairs, depends on the make/model of the car, the coverage offered, and how long it will be in effect. A service contract can purchased for both used and new vehicles and does not come from the manufacturer. They are intended to pick up where warranties leave off.
An extended warranty comes from the vehicle’s manufacturer, are only for new cars, and usually include regular maintenance items such as oil change and tires.
Services such as LoJack and a host of others that help protect your ride from being stolen, and helping recover it quickly if it happens.
Many dealerships offer various services that will pay for a host of repairs, such as key replacement, tires/wheels, paint repairs, dings and dents, and so on.
These are all services that were given an up-front price and rolled into the deal you made, which means you should be able to cancel each of them and get a pro-rated refund. If the dealership where you bought your car isn’t interested in helping you cancel these products and get refunds, you’ll have to put in a little time and effort to take care of them yourself. While there are all kinds of car-selling mistakes that can be made, this failure to cancel add-ons is the number-one mistake car sellers make. You can also make it easy on yourself and sell your car to Driveo. We’ve come up with a fair and transparent process that will put more money in your pocket for your ride than you’re likely to get at any dealership. And we go the extra mile for you by handling all the paperwork so you don’t have to bother with it. Visit our website to get an online quote in minutes that will be good for 30 days and find out you how easy it is to cruise in and cash out at Driveo!