How GAP coverage works
New vehicles lose value faster than their loans are paid down, especially with a long term, small down payment or negative equity from a trade-in. GAP pays some or all of the shortfall up to the contract's limit, excluding items such as past-due payments and late fees.
How it is sold
GAP is usually sold at the dealership as GAP insurance or as a GAP waiver, in which the lender cancels the shortfall and is often reimbursed by an insurer. Banks and credit unions also sell it directly. Many states regulate its price, disclosure and early-payoff refunds, and regulators watch closely whether borrowers receive them.
Where the work is
A GAP claim waits for the insurer's settlement and needs the settlement letter, valuation, loan contract and payment history, gathered from several parties. Administrators reduce or deny claims over a missing document or unexplained deduction. The lender must also request add-on refunds, so one claim can take months of follow-up.
Where automation helps
Automation reads the settlement and GAP contract, calculates the expected payout, assembles the claim and checks any reduction or denial, and a person approves anything sent. The same reading can confirm that borrowers get the GAP refunds owed on early payoff.