Do You Need Gap Insurance?

crappy cell phone pic of my wrecked car (2008)


A few weeks ago, I told the story of how I hit a deer and totaled my car in 2008. I know the above pic is horrible, but it’s basically my car lying on its top in a ditch. What I didn’t talk about in that post was the impact of the wreck on my finances.

I bought the HHR used in 2006, right in the middle of our bankruptcy. I know, that sounds ridiculous, doesn’t it? But I got a job exactly a week after our court date (my luck), and since we gave up one of our cars in the bankruptcy, I had no way to get to work. So my lawyer told me I was welcome to buy a car if I could find someone willing to provide financing.

The dealership where I bought the HHR was happy to provide financing - at 18% interest. Which should be against the law but isn’t. I paid $16,000 for the car, scheduling 6 years of $400 payments. If I hadn’t totaled it, I would have made 72 payments totaling nearly $29,000. STUPID!

The Aftermath of the Wreck

At the time of my wreck, the car was worth $9500 and I still owed around $12,000. Progressive gave me the full value of the car, which was sent to the finance company, leaving me with a $2500 balance. I was so upset!

I actually continued making my car payments for 2 months while driving my dad’s truck to work. But when I bought another car, there was no way I could afford to pay both. So I called the finance company, explained the situation, and asked to refinance the $2000 or so I had left. “Sorry,” the girl told me. “We don’t do refinancing. You’ll have to get a loan elsewhere to pay this off.”

Um, excuse me? My bankruptcy just discharged and you think someone is going to give me a loan with no collateral? I was only able to finance my replacement car by the skin of my teeth!

I was completely willing to pay the remainder of my loan, but not on the current terms. Yet the finance company would accept nothing but the full $400 payment each month. So I did what any broke person would do - I stopped paying them and stopped answering their calls. (Yes, we were broke even after bankruptcy.)

Fast Forward

Here I am, 3 years later, with a charge-off on my credit report. The ONLY negative on my report other than the bankruptcy itself. I pray that my current car lasts forever because I doubt I could finance another one - a charge-off from a car loan pretty much kills any chance of that.

As soon as I insured my current car, I asked Progressive about gap insurance. Gap insurance will pay off your vehicle when you owe more than it’s worth (with restrictions). My coverage will pay 25% more than the value of the car. So if I wreck it tomorrow and it’s worth $10,000, my policy will pay up to $12,500. (Luckily I owe less than the car is worth, so I don’t have to worry about it. Yet I keep the coverage in case my car suddenly plummets in value.)

Some people will say that gap insurance is a waste of money. If you put a large enough down payment on a car, you’ll always owe less than it’s worth. You shouldn’t finance a car. You should only finance for 2 years. Blah blah blah. That’s great, but it’s not realistic for most people. And it’s not realistic for me, even right now.

The Bottom Line

I can’t afford to pay for two cars. If I wreck mine, I’ll have to finance another one. And I can’t pay another car payment on top of the one I’ve got now. I also can’t afford another negative entry on my credit report. So I pay the $60 a year or so to know that my car loan will be paid in full if I have another accident.

No one wakes up in the morning thinking, Oh, I’m going to have a wreck later today! We always hope it won’t happen to us, but you need to be prepared in case it does. If you financed all (or a large part) of your vehicle, chances are you owe more than it’s worth. What will you do if a stupid deer runs out in front of you, like in my situation?

For me, gap insurance is a miracle product. It’s worth the tiny added cost on my car insurance bill. Everyone won’t need that kind of coverage, but if you do, I urge you to talk to your insurance company.

Joining the $30k Challenge

Some of you may have noticed the badge in my sidebar, but I wanted to officially announce my entry into the Online Money Bloggers $30k Challenge!

This challenge is the brainchild of two fellow Yakezie members, Derek from Life and My Finances and Corey from 20s Finances. Basically, a bunch of bloggers will be competing (in a friendly way!) to reach $30,000 in blogging income in 2012 - or $30k more for bloggers who already make that much. Along the way, our progress will be aggregated on the OMB website, and we’ll all be posting about our efforts, successes, and failures on the OMB blog.

I’m pretty sure I’m crazy. Do I hope I make at least $30k in 2012? Of course! But do I think I can actually do it? I’m not sure! I have several plans to increase my online income, especially since I’ll be blogging/freelancing full time in 2012, but I’m not sure how successful I’ll be.

The worst case scenario is working my butt off all year and falling short of my $30k goal. And if that happens, I’m okay with it - I know I’ll be learning from some extremely talented and ambitious bloggers, and it’s up to me to implement that knowledge and turn it into a way to pay the bills. I can actually survive on less than $30k, so the world won’t end if I don’t make it.

That said, I love competitions and I don’t like to lose. So hopefully this will be the push I need to work hard and earn some money!

I encourage you to visit the Online Money Bloggers site periodically and keep up with the progress of the challengers. I’m sure it will be interesting to see the various ways we come up with to get paid!

Toys: The Biggest Money Pit Ever

dragonball z toys - the latest obsession to bite the dust


For me, one of the most frustrating parts of being a parent is keeping up with whatever toys are the BEST THING EVER at the time. I’m not one to buy every single thing Jayden wants, but part of his Asperger’s Syndrome involves utter obsessions with certain toys or groups of toys. When I do buy them, I know he’ll play with them for hours and hours, for months or years on end.

However, when one obsession ends and another begins, I’m left trying to figure out what to do with all the stuff he no longer wants. And I can’t help thinking about all the money I’ve lost due to the insane depreciation of toys, video games, and movies. I’m pretty sure I could buy a car with all the money I’ve spent in 13 years.

Continue reading

More Slacker Team Link Love

I’ve been catching up on reading posts this weekend - obviously many of you haven’t been, since everyone I know is experiencing super low traffic! Hopefully you have some time to check out these awesome posts from my Yakezie winter team members!

World of Finance asks, who are the Joneses? We’re all supposed to keep up with them, but why? I have a feeling the Joneses are pretty miserable.

Net Worth Protect is going to be a father! Go read about his plans to overhaul his finances and send him some congratulations!

Debt Free by Thirty has been making a bunch of holiday treats to give as gifts, and I may or may not be drooling. Also, she sent me a Christmas gift and I love her. (You know you have awesome friends when you don’t win their giveaway and STILL get a prize!)

Money Cactus tells us how to deal with collectors without having a nervous breakdown. In a perfect world no one would have to deal with this, but unfortunately real life doesn’t work that way.

Money Trail interviewed a teenager about her experience as a volunteer. How awesome that there are still kids out there helping others instead of focusing on themselves!

Girls Just Wanna Have Funds posted a list of 5 Financial Holy Grails to stop worrying about. I’m with her - there are much more important things to spend time on!

Mom’s Plans updates us on life without credit cards, six weeks after putting her cards in a jar of peanut butter! It’s amazing how much faster you can pay them off when you STOP USING THEM - believe me, I know from experience.

Thirty Six Months lists 9 cheap Christmas gifts for your friends. My personal thoughts on Christmas are coming up (including why I haven’t posted about it) but I know some of you are less Scroogey than I am!

The Single Saver tells us how to sell unwanted gift cards. Personally, I HATE getting gift cards unless the person knows what stores and restaurants I like.

Nickel by Nickel has a great post about the temptation of STUFF. I’m whistling innocently with hands in my pockets… Actually I’m doing really well and haven’t been buying much lately.

My Multiple Streams posted about new IRS rules that could cost bloggers 28% of their income. Scary! Especially since my online income will be paying my bills and feeding my face starting next week.

Penny Pinching Professional compares cell phones to soup. I loved this post - it’s a very interesting way to look at cell phone contracts and whether they’re worth it.

Newlyweds on a Budget discusses 3 myths about marriage. As a former married person, I found myself LOLing at the myths and their lack of application to my failed nuptials. (That word looks funny. Yet it’s not misspelled. Hmm.)

Mid Life Miser tells us how to get cheap seats for sporting events. I haven’t attended a big sporting event in quite awhile, but I’m filing these tips away in case I need them in the future.

Invest in the Markets is giving away an Amazon giftcard, a 30-minute investing consultation, and subscriptions to the Weekend Investor newsletter! Go enter!!!

Your Finances Simplified is also doing a giveaway - $50 cash via Paypal! There are lots of entries but that doesn’t mean you couldn’t be the winner!

Cents to Save got one of those phone calls we all dread, and is dealing with the aftermath. Go show her some love - I’m sure she would appreciate it!