Collision Coverage Gap Calculator

An insurer settles a total loss at what the vehicle is worth, not at what you owe on it. In the first years of a long loan with a small deposit those two numbers can differ by thousands of dollars, and the difference stays with you even though the car is gone.

This calculator compares the settlement you would receive against the loan balance, and shows how the shortfall changes as the vehicle depreciates over the coming year.

Result

Shortfall after settlement

$6,000

Position today

A total loss would leave a balance owing after the settlement

Estimated settlement: $25,500
Equity position: -$6,000
Shortfall in one year: $9,900
Loan to value: 121.15%
Gap cover premium: $180
Shortfall covered per premium dollar: 33.3
Settlement basis: Actual cash value

This is an estimate based on the values you entered. Actual premiums, coverage, eligibility and pricing vary by provider and by individual circumstances.

Insurers settle a total loss at the vehicle’s value, not at what you owe. When a loan balance exceeds that value - common in the first years of a long loan with a small deposit - the difference stays with you.

Gap cover addresses exactly that difference. Whether it is worth its premium depends on the size of the shortfall and how quickly the loan amortises past the vehicle’s value.

How to use the collision coverage gap calculator

Enter the current market value of the vehicle.
Enter the outstanding balance on the loan or lease.
Enter the deductible that would apply to the claim.
Add the annual cost of gap cover, if you have been quoted one, and read the shortfall.

What people use this for

Deciding whether gap cover is worth buying on a new purchase.
Checking when gap cover can be dropped because the loan has caught up.
Understanding the exposure before agreeing to a long loan term with a small deposit.
Reviewing a lease, where a shortfall provision is often built into the contract.

Worked examples

Every figure below is produced by running this calculator against the example inputs, so the numbers always match the tool.

A new car early in a long loan

A vehicle now worth $26,000 with $31,500 outstanding, a $500 deductible and a $180 annual gap premium.

Shortfall after settlement: $6,000
Estimated settlement: $25,500
Shortfall in one year: $9,900

A loan that has caught up with the value

The same vehicle two years later: worth $19,000 with $16,200 outstanding.

Shortfall after settlement: $0
Position today: The settlement would clear the loan balance
Equity position: $2,300

How a shortfall appears

A new vehicle loses a significant share of its value in the first year, while a loan with a small deposit and a long term amortises slowly at first. For a period the balance exceeds the value, and that period is longer the smaller the deposit and the longer the term.

Adding negative equity from a trade-in to the new loan extends it further, because the new loan starts above the value of the new car.

What gap cover does and does not do

Gap cover pays the difference between the insurance settlement and the loan balance after a total loss. It does not pay your deductible unless the policy specifically says so, it does not cover missed payments or late fees, and it stops being useful the moment the loan balance drops below the vehicle value.

That last point is the one people miss: gap cover bought for a five-year loan is often unnecessary for the last two or three years of it. Re-run this calculation annually rather than paying for it out of habit.

Methodology and assumptions

What this calculator does, and what it deliberately does not do.

The settlement is the vehicle value minus the deductible. The shortfall is the loan balance minus that settlement, floored at zero.
The one-year projection applies the depreciation rate you entered to the vehicle value and holds the loan balance constant, which is deliberately conservative - a real balance falls too.
All figures are estimates produced from the values you enter. This site has no rate feed and no carrier data, so it cannot quote or price a policy.
Nothing you type is transmitted or stored - the calculation runs entirely inside your browser.

This calculator provides an estimate based on the information you enter. Actual insurance premiums, coverage, eligibility and pricing vary by provider and individual circumstances.

This website is not an insurance company, an insurance agency or a licensed broker. It does not sell insurance, does not provide insurance quotes, and is not authorised to give advice about which policy you should buy.

No result produced here is an offer of insurance or a guarantee of coverage. Only a licensed insurer or agent, working from your verified details, can quote or bind a policy.

Frequently asked questions

Is gap insurance ever required?

Lenders and lessors sometimes require it, particularly on leases. Otherwise it is optional.

Can I buy gap cover from somewhere other than the dealership?

Usually yes. Many auto insurers offer it as an endorsement, often at a lower cost than a dealer-financed product added to the loan.

Does gap cover pay my deductible?

Not by default. Some policies include a deductible allowance up to a stated amount - check the wording rather than assuming.

What if I have positive equity?

Then the settlement clears the loan and the balance goes to you. Gap cover has nothing to pay, and continuing to pay for it is a waste.

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