Perhaps the biggest profit source for today’s car dealerships is not the sale of the car itself, but various forms of insurance.
These can range from GAP (Guaranteed Automobile Protection) insurance, disability insurance (often referred to as “credit insurance”) and extended warranties or service contracts.
These are not traditional insurances as they rarely have any substantial benefit to the consumer. As an example, if a car is totaled and if their is a balance due on the car loan because the car is worth less than the collision insurance will pay due to the age of the car, then the GAP insurance will pay off the amount that was not paid by the collision insurance. This payment is paid directly to the creditor.
A credit insurance policy purchased at the time of the car purchase is often much more expensive than purchasing a basic disability policy from an insurance agent, and further, just like the GAP insurance, only pays the balance due on the loan and then to the creditor only, rather that a traditional disability policy that pays the insured consumer directly and pays the actual value of the policy, not just a balance due.
But perhaps worse than the sale of the insurance itself are the tactics often used to sell this insurance to the unwary buyer.
I will tell you about the misfortune faced by three recent clients in articles to follow.