When do you need car gap insurance?

Tara Baukus MelloQuestionDear Driving for Dollars,
I just bought a luxury sedan that is one year old -- a 2009 model. Do I need car gap insurance?
-- Donna

AnswerDear Donna,
You might need car gap insurance. As a general rule of thumb, used cars depreciate about 30 percent in the first year, so if you paid at least 30 percent less than the original sticker price, then you might not have much of a gap at the moment. However, when the 2011 models have fully arrived, you'll suddenly own a car that is two model-years old. The balance due on your car loan will be nearly the same yet the car will be worth even less.

Once the 2011 model is out for the car you own, which may be now, go to a third-party car-pricing site and enter your car's specifics to see what it's worth, and compare that number to what you owe. If there's a big gap, then start making some calls to insurers to get quotes on car gap insurance.

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If you have a car question, e-mail it to us at Driving for Dollars. Read more Driving for Dollars columns and Bankrate auto stories.

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