I work in insurance. Local cash value is normal. It’s not a Craigslist lookup, it uses industry standard published tables and is the same across all companies. People are frequently shocked that they are underwater on their cars so much, but it’s worth what it’s worth, car insurance has no reason to cover loans. As you found out, GAP is insurance on the loan itself, most lenders will strongly encourage GAP coverage or even mandate it.

There was absolutely no way I could walk into anything but the most decrepit used car dealer and walk out with a car anywhere near what I previously owned for what they gave me, completely unrelated to whether or not I had a loan. The KBB was around 20k dealer. They gave me the crumb not fully loaded non F-sport (a $5k package) private party low end. $15k was shockingly low. Mine had like, 15k miles and the 15k range had over 100k. Their criteria seemed to be "Lexus I of some sort, cheapest." I don't think the IS250 was even normally that low.

Maybe it's what they all do, but it sucks. And it's not what a lot of people expect.

FWIW our car (2014 RAV4 EV) was totaled in California in 2018, and the insurance payout pretty much exactly covered replacing it with a near-identical new model (actually a bit lower mileage!) from a local used car dealer. I think we actually came out a few hundred dollars ahead.

We were insured with Travelers.

I’ve wondered since then if that’s how it usually works out, or if we were a lucky fluke.

Travelers does well with that. I switched after I was in a not at fault accident (other side was a commercial vehicle, fully insured, 100% admitted liability) and got screwed over by my own insurer (low ball offer on the value, stalling on giving me access to the comps until the night before the offer expired, reneging on rental coverage, threatening to not cover something with PIP...)

I have two "new" cars (2019 and 2021 model years) that I've had since they were less than a year old, and have new car replacement on both.

Travelers is relatively unique in that their new car replacement is up to 5 years, not 1 as most are (some go to 2 or 3). NCR also integrates gap coverage.

If my 2021 RS 5 gets totaled two years from now, I get a check for 110% of the MSRP for a 2026 RS 5.

We had our i3 totalled a few years ago. Insurance company guy was transparent and said he'd gone to our version of Craigslist here in Norway, found i3's of same age and similar milage, and took the average.

As such I could definitely buy a replacement with the payout.

While I'd much rather be without the experience, I was almost pleasantly surprised by the insurance company.

That’s what progressive did when our older car was totaled by hail. It wasn’t just Craigslist but it was some similar ones available- and averaged. They’d go buy one for us, or give us the cash, or (what we did) is give us back the car and most of the cash.

You may have been able to push for a better settlement if you saw their comps and noticed they were not actually comparable, but at the end of the day, no insurance company will give you more than local market value. If you're underwater on the loan and the value doesn't cover it, that's om you. I never buy GAP; if you need to buy GAP, you should be buying less car.

Yeah I really had no idea what powers/options I had in the situation. The way they treated me made me seriously want to somehow get them to recover a LOT of money I had to spend (around $4-6k in impound lot fees they wouldn't pay). They pretty much went out of their way to make me feel like I should be grateful they helped at all.

I was maybe 23 and definitely didn't have money for legal help. I hate how I let myself get treated.

Don’t beat yourself up over it. But also, post the learnings not just the mistake without the context only for both of them to come out later after people point them out.

GAP comes on leases too pretty standard these days.

You may have done some, but you can negotiate with the insurance company and either seek legal help or file a protest with the department of insurance if they are not in good faith servicing your claim.

It seems like the industry has some pretty strong incentives to standardize on the lowest possible values in those tables.

Further, what does “worth” mean if you can’t take the amount of money you were given and easily purchase a car of the same make, model, year, and condition?

Particularly when you add on them keeping your car and parting it out or whatever. I got screwed on that pretty hard... they "forgot" to document all the options and packages (my car was intact, generally, but totaled due to airbag deployments). Even tires (look, I am realistic, I don't expect that to account for much)... I'd just put new performance tires ($1,700) on them 400 miles prior (yay for the odometer reading on the receipt) and they weren't affected by the accident, but the adjuster looked at a scale of "New / Like New / Excellent / Good / Fair / Poor" and described them as in "Fair" condition. When I balked at that they upped the offer by $60, $15 a tire. If it wasn't for all the drama associated with it, I'd have bought the car back and parted it myself.

where do they get the data to publish in the industry standard tables?

I had a two year old Audi A4 totaled. I expected that I'd get about $24K for it (this was a couple of years ago). My insurer offered $19K. I asked to look at the comps, and sure enough, most of the comps were between $22K and $27K. Except one, from a shitty little dealer 150 miles away for $12,999. There was obviously something up, salvage title, or some other issue. But they shrugged. "Doesn't say so on the offer, so it's a valid comp".

My two cars now have new car replacement coverage for 5 years that also wraps in gap coverage.

It absolutely is a local craigslist lookup— I followed up with one of the dealerships USAA called (6 hours away from where we live, with all of four cars in their "lot") to clarify how their valuation was provided. They explained that Vanessa (the USAA agent) simply asked how much they would sell a VW TDI for if they were a VW dealership. The high-school aged secretary said she didn't really know, so agreed that whatever value Vanessa offered sounded reasonable. This was the value they were willing to pay when their drunk client smashed through my parked car in the middle of the night in his BMW on the way back from the opera. "Industry Standard published tables" must just be the title on the top of the sticky note from her calling around.

The whole thing was an absolutely miserable experience completely stacked against any sort of reasonable resolution, and USAA was caught in so many lies it still irritates me years later. I'm sad that this is so clearly a continual process for people day to day.

Lol, wild. Mine was also a drunk lady slamming into my parked car. I had absolutely nothing to do with the theft and accident at all. And I was treated that way. I was actually out drinking for my birthday and my car was parked (downtown where I lived) next to a bar my friend worked at and he called me.

where does the data in those “published tables” come from?

Gap insurance covers a tightly-bounded amount of loss (it will never pay out more than the remainder of your loan), which is why it's so cheap. That's also why it's a great target for self-insurance - you know exactly how much you need to have to cover the worst-case loss. If you have the cash, you are almost certainly better off skipping this one.

If you have the cash you might as well just skip the loan, unless it’s unconscionably low.

For new cars you can sometimes get really low loan rates that are lower than inflation. IMO it's basically free money to take out the loan.

I also had a terrible experience with USAA. I don't know what happened to them, but it is a rotten company now. I switched to Country Financial recently as I can at least talk to a person without a nightmare phone tree there.

A bit of a tangent but this is one of the biggest reasons I don't buy new cars. The depreciation in the first few years is astonishing. You are immediately underwater and will be until you've paid off at least half the loan balance (this is not the same as paying half the payments).

My previous car was new, but only because we were buying a minivan and there were significant new safety features just introduced. But totally agree that buying used makes sense if there's not a significant difference in functionality.

There are brands (and probably is market dependent too) where this isn’t always true. Where I live, a 3 year old Toyota or Honda costs 10-15% less than a new one. In that case, it doesn’t really make sense to buy a used one if you can afford it.

Still, I also buy cars used. But I go ~10 year old, from a reputable low maintenance brand and model.

My personal opinion is that if a vehicle's loan value would ever exceed the value of the car, you can't afford it.

Well, your car's value plus your disposable assets.

But I agree. A lot of these problems are solved by not buying such expensive cars.

Being expensive is not so much an issue as it is buying a car that will depreciate faster than it can be paid for, because that's how people get in over their heads.

It's not just expensive cars, people are putting tiny down payments on cheap new cars financed for long terms and they're under water for years.

Not everyone buys a car to sell their car though. Some of us buy vehicles to keep, collect, race, trade, etc. I could not care LESS what the value of my 2 sports cars is in 15 years unless it soars to the moon for some reason and I become a millionaire.

This isn't /r/frugal fwiw.

I know, I have a few vehicles without plates in my garage :)

I’m talking about the people buying cars for transportation who are in a financial situation for which GAP insurance might be a concern.

Unless you’re going to put 40% down, you’ll have a day when the loan balance exceeds the value of the car.

My last car loan was at 0% (meaning the only cost of financing was the insurance company profit on the collision policy that I had to take because of the loan). No way am I putting down 40% on a 0% loan.

I could have charged the car on my credit card for the points and paid it off 45 days later; it’s not a matter of being able to afford it.

Not at all, something like a used Tacoma on a short financing term will not need anywhere close to a 40% down payment to stay above water.

I have a 3% loan on one of my $25k cars I race because my money makes 8-10% in the markets and having $25k sitting in them vs giving to a leinholder dropped me 3-4% yoy on it (3% loan), but it still isn't 0, or negative it's in the +4-8% range. I also take tons of 0% loans year through year. You can utilize debt and credit to your gain it becomes more of a "Ok I will pay you $30k in 3 months instead of right now because my money sitting here makes more than you charge me to borrow or less than the money makes sitting in my account paying you 3%." You know, those 4.5%+ SAVINGS accounts right now?? I make TWICE that in the market.

It's not smarter to bypass Apples 0% interest financing on a $3500 macbook or VR headset than drop the $3500 that will now make %0 interest for you immediately.

Some of you (all of us?) were taught some moral/ethical line about not incurring debt by our ignorant boomer parents who follow the "don't ever be in debt!!!" mantra, which is literally impossible nowadays. And they are INSANELY in debt. Almost every boomer home owner has a reverse mortgage!! Your boomer parents were rich at $50k. We are not. My boomer parents had a $150k 3500sq ft house. I have a $3100/mo 1300sq ft townhouse.

Learn financing.

I pay my boomer parents rent now because they royally fucked up their finances. Do not listen to boomers for financial advice. And I mean the bobbleheads on TV as well. I guarantee a LOT of you will be paying your parents rents soon. My moms 71. They were stupid beyond belief with their money. Just remember all the trash they bought in the 1990s, 454 cubic liter 2500 HD suburbans? Hummers? Massive houses?

Go torch your Kiyosaki books and everything else and throw that $1500 Camry you've driven for 35 years in the trash and spend the whopping $20k on a new car that can survive a collision and enjoy your life. Who gives a fuck if you're rich at 75 when you can't do anything.

If you want no replacement, replacement value, or loan value it's pretty clear that those or separate coverage and options. It sounds like you just got the wrong level of coverage and blame USAA for that more than anything. TBF, if you used them for the loan, I'd kind of question the proper insurance not being suggested at purchase time, but if not... it's kind of on you.

FWIW, I have USAA and had the almost exact same thing happen to me in 2020 - car stolen and totaled. They paid me a really fair deal on the cash back for the 2yo crosstrek.

It probably helped that it was a cut and dry case - the thief took the keys from inside my house and I called the cops seconds after I saw him drive away with it.