CarMax GAP Insurance: A Comprehensive Guide

CarMax is the largest used car company in the United States and sells more than 750,000 cars a year. For its customers who finance directly with the company, CarMax offers GAP insurance for roughly $30 a year. When you combine CarMax GAP insurance with affordable car insurance, you will be better protected from any future theft, accident, or natural disaster.

If you have a high-interest loan, low down payment, or a longer finance term it is much more likely that you will owe more on the vehicle than it is worth. If you’re purchasing through CarMax, the company’s GAP insurance will ensure you don’t owe on your vehicle if it’s a total loss. 

How Does CarMax’s GAP Insurance Work?

First off, CarMax does not offer its GAP insurance for anyone. To get CarMax GAP insurance coverage, you must buy a vehicle through one of its local stores and finance with CarMax.

CarMax will offer and sell you GAP insurance, but it does not manage the coverage once it is purchased. CarMax utilizes Safe-Guard Products LLC. to manage all GAP insurance claims, payments, and customer support.

When to Buy CarMax GAP Insurance

The CarMax GAP insurance also must be purchased within seven days of financing your vehicle. In some reports online, CarMax sales reps have stated customers had 90 days to purchase GAP insurance. There have been several accounts where customers returned to purchase the GAP insurance and they were unable to buy it because it was past the seven-day window. Be sure to opt-in for the CarMax GAP insurance on the same day you finance your vehicle.

It’s also important to note, CarMax MaxCare is not the same thing as its GAP insurance. MaxCare is an extended service plan only. 

Choosing Yearly or Monthly Premiums

The CarMax Gap insurance is only available on a yearly plan and cannot be paid on a month-to-month term. You will be able to purchase the coverage for the first year when you complete your financing. The premium in the subsequent years will be owed every year until you are done financing your vehicle.

Filing a Claim With CarMax GAP Insurance

Once you have purchased your vehicle with CarMax, and you have opted to purchase GAP insurance, your vehicle will be registered with Safe-Guard using the Vehicle Identification Number (VIN). You’ll also need to have your comprehensive or collision insurance in place.

The optimal goal would be to drive your vehicle without any problems, accidents, natural disasters, or theft. But this is the real world. If you have a claim you will need to go to the Safe-Guard/CarMax GAP insurance website and submit a claim. You’ll be asked for your name, phone, car make and model, and VIN. 

CarMax GAP Insurance After Purchase

Don’t plan on your CarMax sales rep to have much involvement after the sale of your vehicle with your GAP insurance. Unlike a typical insurance rep, CarMax only offers the coverage and does not directly manage your GAP insurance. Be aware if you want to talk to a customer sales rep regarding your GAP insurance, they may not be able to help you.

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What Does CarMax GAP Insurance Cover?

When you’re at the CarMax finance department’s desk, it’s most likely you’ll be offered GAP insurance. But what does it cover?

With CarMax GAP insurance you get coverage for a total loss due to:

• Fire
• Theft
• Accidents
• Hurricanes
• Flooding
• Tornados

If any of these happen to your car and it is a total loss, CarMax GAP insurance will pay the difference on what you owe if the insurance payout is less than that amount.

What Isn’t Covered by CarMax GAP Insurance?

While it seems like you are covering a large scope of potential problems that could occur to your vehicle, CarMax GAP insurance will not cover everything.

This includes:

• Repairs to your vehicle
• Extended warranties for car loans
• Rental cars while your vehicle is being fixed
• A down payment on a new car
• Carry-over balances on any loans you rolled over into your new car loan
• The diminished value of your car after an accident
• Car payments not being met because of loss of employment, financial hardship, disability, or death

GAP insurance only covers the difference between what the car is worth and what you owe in a total loss.

What is GAP Insurance?

No matter what car you buy, it will lose its value over time. Wear and tear, accidents, and the overall age of the vehicle will cause the value to decrease. When you lease or finance your car, the amount you owe on a car can be higher than the car’s actual value.

That means if your car becomes undrivable in an accident, is stolen, or is damaged by natural disasters you could still be paying for your car even though you can’t use the car. With GAP insurance the remaining balance owed is covered by the GAP insurance provider.

GAP insurance is a great option to make sure you’re not paying for a vehicle you no longer have, even if you are upside down on the loan.

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Do you need GAP Insurance?

When purchasing a vehicle it is important to review your monthly payment. What affects your payment? There are a variety of different financing options available when you purchase your car. A down payment is the amount of cash offered upfront for purchasing a vehicle. This will reduce the amount you pay per month. In addition, your interest rate and the financing term will also change how much you owe per month.

With GAP Insurance you are better covered if you have a high-interest loan, zero or low down payment, or you have a longer finance term over 60 months. Depending on your financing, some companies will require GAP insurance.

With car prices increasing with newer and more advanced vehicles, GAP insurance has become a standard for the car insurance industry. Be prepared for it to be discussed with your new or used vehicle financing. In addition, several other insurance companies offer GAP insurance for your vehicles.

GAP Insurance Pros:

• Generally low costs
• It means you can generally walk away from an accident with less of a financial burden
• If you purchase a more expensive vehicle you are more likely to have financial stability in an accident

GAP Insurance Cons:

• Eventually, there will be a point when you owe less than the vehicle is worth and you may not need GAP insurance coverage and you may not be able to get a refund for the year
• If you buy your vehicle at a low price it may not be worth it
• GAP insurance is an additional cost with requirements for upkeep

Make sure to weigh the pros and cons as they apply to your unique situation.

Is CarMax GAP Insurance a Good Idea?

On average, the usual CarMax vehicle sale is over $21,000. While CarMax is a leader in used car sales, the company does not typically offer vehicles below $10,000. With GAP insurance some vehicle sales below $10,000 may not be worth it.

CarMax is known for providing high-quality used vehicles. When you combine the costs of financing, your monthly payment can be high. CarMax GAP insurance will help you be financially sound, even if you are upside down on your vehicle payments.

The CarMax website does not directly list how much the GAP insurance costs, most customers report the coverage costs of $30 a year, for most vehicles. It is important to check with your local CarMax sales office to verify all GAP insurance costs.

CarMax GAP Insurance Final Review

If you are financing directly through CarMax, you can expect to have the GAP insurance added to your financing package. With CarMax’s higher-quality vehicles and higher prices, your monthly price may be more depending on how much of a down payment you have.

But for only $30 a year, this coverage is an excellent option to ensure financial stability in an accident, theft, or natural disaster. Make sure to ask your CarMax sales rep to provide you with all the details on their GAP insurance plan.

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Case Studies: CarMax GAP Insurance: A Comprehensive Guide

Case Study 1: A High-Interest Loan

John purchases a car from CarMax and finances it with a high-interest loan. Unfortunately, a few months later, the car is involved in a severe accident and is declared a total loss by the insurance company. Without CarMax’s GAP insurance, John would have been responsible for paying off the remaining loan balance, which exceeded the actual cash value of the car.

However, thanks to CarMax’s GAP insurance, the difference between the insurance payout and the remaining balance was covered, relieving John from the financial burden.

Case Study 2: Low Down Payment

Sarah buys a car through CarMax and makes a low down payment. A year later, the car is stolen and never recovered. In this situation, Sarah would have faced a significant financial setback because the insurance payout would not have been enough to cover the remaining loan balance.

However, CarMax’s GAP insurance stepped in and paid the difference, ensuring Sarah didn’t have to pay out of pocket for a vehicle she no longer possessed.

Case Study 3: Long Finance Term

Mike finances a car with a long-term loan, stretching over six years. Unfortunately, a natural disaster strikes, causing extensive damage to the vehicle. The insurance company determines it as a total loss, but the insurance payout falls short of the remaining loan balance.

Thankfully, Mike had CarMax’s GAP insurance, which covered the difference and prevented him from owing money on a car that was no longer usable.

 

 

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