If you intend to purchase a new car and make a minimal down payment, or no down payment at all, bear in mind that the value of your car will depreciate rapidly after you drive it off the lot. In some cases, a new car can lose up to 30 percent of its market value within the first few months. This can lead to financial trouble if the car is totaled during this time; most collision insurance policies compensate the owner for the value of the car, not the value of the balance on the car loan.

Gap Coverage Insurance

Gap coverage insurance can protect you if your car is totaled during the early period of ownership, when you owe more on your vehicle than it's worth. For example, if you bought a $20,000 dollar car, your collision coverage may compensate you for the current value of the car after an accident occurs. If this value is calculated at $15,000, you'll need to pay the remaining $5,000 on your loan.

Additionally, you must pay for the deductible on your collision coverage and possibly for the cost of a new car. Gap coverage insurance can shield you from financial hardship if you find yourself in this position.

Finding Gap Insurance and Comparing Gap Insurance Rates

As you begin the process of finding gap insurance and reviewing gap insurance rates, remember that most gap coverage insurance will only apply if you also have collision coverage. It's a good idea to purchase your gap coverage insurance from your collision coverage provider, rather than the dealership at the time of the sale. An auto insurance provider can usually offer better rates.

Expect to pay premiums that add up to 5 or 6 percent of your annual premium for collision and comprehensive coverage. Along with the cost of collision and comprehensive coverage, gap insurance rates should decrease as your vehicle ages.