How much is gap insurance in New Mexico

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Gap insurance costs $2,103 annually in New Mexico, which is $206 more than the national average.

Offered by many leading insurers, such as Progressive and Farmers, gap insurance serves as a financial safety net for drivers who finance or lease a car. It bridges the gap between the vehicle’s actual cash value and the outstanding balance owed on an auto loan or lease if the car is declared a total loss, such as after an accident or theft. Your insurer may also call it loan or lease gap coverage.

Gap insurance rates vary by location, but in New Mexico, you can expect to pay around $2,103 annually, which breaks down to about $175 each month.

What is gap insurance?

If your car is declared a total loss or stolen, gap insurance can help cover the difference between its actual cash value and what you still owe on your loan or lease. It’s an optional add-on, but it can save you from paying out of pocket.

When you finance a new car, it’s easy to overlook how quickly it loses value once you drive it off the lot. In many cases, you’ll owe more on your loan than the car is actually worth.

If your car is totaled, your insurer will reimburse you based on its actual cash value, not what you still owe on your loan. If your loan balance is higher than the payout, you’re responsible for covering that gap – unless you have gap insurance, which can cover the difference.

“When an accident or theft occurs, a driver usually gets paid out on the vehicle’s cash value from their standard insurance coverage,” says Richard Howe, a car accident attorney in Atlanta. “However, without gap insurance, you will still be on the hook for the remaining amount in your agreement. Gap insurance provides peace of mind to drivers that they will be financially protected.”

“For instance, let’s say your car is totaled and the actual cash value is determined to be $15,000. However, you still owe $20,000 on your loan. Traditional auto insurance would only cover up to the actual cash value, leaving you with a $5,000 deficit,” says Howe.

“But if you have gap insurance, this difference would be covered, relieving you of the financial burden.”

Average cost of gap insurance in New Mexico

The cost of gap insurance varies depending on your insurance company, location and the type of car you drive. On average, gap insurance in New Mexico costs $2,103 annually or $175 each month.

“Gap insurance is an optional coverage that is usually very reasonably priced, typically less than $100 per year in additional premium when added as an endorsement to your existing auto insurance policy,” says Mark Friedlander, director of corporate communications for the Insurance Information Institute, an insurance industry trade group.

“Gap insurance rates are based on the amount of your loan or lease agreement. It is typically not based on other common rating factors such as credit record.”

Cheapest gap insurance companies in New Mexico

Progressive offers the cheapest gap insurance rates in New Mexico, at $1,591 annually or $133 monthly. On the other hand, Iowa Farm Bureau offers the most expensive rates at $2,938 per year or $245 per month.

The chart below looks at the average annual rates insurers charge for gap insurance in the state.

How much is gap insurance per month in New Mexico?

The monthly cost of gap insurance can vary, but here’s what you can typically expect to pay:

Gap insurance rates in New Mexico’s top cities

Gap insurance rates can vary based on where you live. The table below shows the average annual cost in major metro areas across New Mexico.

Gap insurance rates for different vehicle types

Your gap insurance rate can vary depending on the make and model of your car.

“Luxury cars, sports cars, and SUVs – typically with higher purchase prices – might also come with higher gap insurance premiums. That’s because these vehicles tend to depreciate at different rates compared to standard sedans or compact cars, posing a greater risk to insurers,” Howe says.

The age of your vehicle plays an important role in how much you pay for gap insurance.

“Newer vehicles, which depreciate more rapidly in the first few years, represent a higher risk for insurers offering gap coverage. As a result, a brand-new car might attract a higher gap insurance premium compared to a model that is several years old,” Howe says. “This reflects the insurer’s risk assessment, considering the steeper depreciation curve and the greater likelihood of a significant gap needing coverage soon after the purchase.”

When does gap insurance expire?

It’s a good idea to keep gap insurance for as long as you’re financing or leasing your vehicle, since it protects you from owing more than the car’s depreciated value.

“However, gap insurance is typically most relevant during the first few years of new car ownership,” Howe says.

That’s usually when you owe more on your loan than the car is worth.

“Most car buyers benefit from gap insurance when the vehicle is less than three model years old. This coverage is usually aligned with the duration of the car loan or lease, often making it unnecessary beyond a few years because the loan balance decreases to fall below the car’s actual cash value,” Howe says.

You can cancel gap coverage once your loan balance dips below the car’s actual cash value. Many insurers automatically end the coverage after a set number of years for the same reason.

Where to buy gap insurance

There are three main ways to buy gap coverage, each with a different cost and set of rules.

• Your auto insurance company: Many national and regional insurers offer gap coverage as an add-on to your regular car insurance policy, typically costing between $20 and $40 annually. Since it’s bundled with your policy, you can drop it once your loan balance is lower than your car’s current value.
• Dealership: Gap insurance is usually offered by finance managers for anywhere between $400 and $700, and the cost is often rolled into your loan. While it’s convenient, this option tends to be the priciest because you’ll likely pay interest on it over time.
• Banks and credit unions: Some banks and credit unions offer gap insurance as a standalone policy. It is usually affordable, but the cancellation rules vary – some providers refund unused premiums, while others don’t.

Before you buy gap insurance, compare rates, check cancellation policies and look for perks such as deductible reimbursement. Shopping around can help you save big over your loan or lease term.

The bottom line

Gap insurance can be an affordable way to protect yourself from paying thousands out of pocket if your car is totaled or stolen. Rates vary by state, vehicle type, and personal factors, so it pays to shop around and compare quotes from multiple insurers.

Consider whether the age and value of your financed or leased car justify the added protection, and don’t hesitate to ask questions when reviewing policies – understanding the details now can save you a costly surprise later.

Methodology

Insure.com commissioned Quadrant Information Services in 2023 to get annual and monthly gap insurance rates for male and female drivers aged 40 who drive a Honda Accord LX with a clean driving record and good insurance score and carry a full coverage car insurance policy with limits of 100/300/100 and $500 comprehensive/collision deductibles.

To evaluate the rates, we have compared 53,409,632 insurance records from 170 insurance companies across 29,152 cities and 34,588 ZIP codes across the nation.

Shivani Gite

Contributing Writer

 

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Shivani Gite is a personal finance and insurance writer with a degree in journalism and mass communication. She is passionate about making insurance topics easy to understand for people and helping them make better financial decisions.