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Gap Amount

What is 'Gap Amount'

Insurance will only cover a certain amount of coverage if leased items are stolen or totaled. There is often a difference between the amount the insurance company covers and the amount of the vehicle that is owed under the lease agreement, because of the way lease agreements are structured.


Gap amount is the portion of a leased item's value that is not covered by insurance, in the event of a total loss from an accident or theft. Its calculation is based on the terms of the lease's early termination payoff provision. To protect against losing money because of the gap amount, consumers can purchase gap insurance.

Explaining 'Gap Amount'

The lease payments at the beginning of the lease term do not fully cover the vehicle's depreciation, because vehicles depreciate in value more quickly when they are newer and because a consumer's vehicle lease payments are flat amounts paid monthly over a period of several years.


For example, a consumer might lease a $25,000 car for three years. It might depreciate by $5,000 in the first year, but the lessee might only pay a total of $3,600 in lease payments during that time. If the car is totaled at the end of the first year, the consumer will need to make up for the difference between what they paid and the value the car has lost. The gap amount would be $1,400, in this case.


Further Reading


The ghost of financing gap: testing the growth model used in the international financial institutions
www.sciencedirect.com [PDF]
… The use of ICORs and Financing Gaps at the World Bank was not new. A paper in … capital would automatically lead to a technological spillover (and of just the right amount to give … The Harrod-Domar/Financing Gap shows up not only in the quantitative calculations of …

Inter-sectoral differences in the SME financing gap: Evidence from selected sectors in GhanaInter-sectoral differences in the SME financing gap: Evidence from selected sectors in Ghana
www.tandfonline.com [PDF]
… The use of ICORs and Financing Gaps at the World Bank was not new. A paper in … capital would automatically lead to a technological spillover (and of just the right amount to give … The Harrod-Domar/Financing Gap shows up not only in the quantitative calculations of …

Funding gaps? Access to bank loans by high-tech start-upsFunding gaps? Access to bank loans by high-tech start-ups
link.springer.com [PDF]
… The use of ICORs and Financing Gaps at the World Bank was not new. A paper in … capital would automatically lead to a technological spillover (and of just the right amount to give … The Harrod-Domar/Financing Gap shows up not only in the quantitative calculations of …

Spending in retirement: Determining the consumption gapSpending in retirement: Determining the consumption gap
search.proquest.com [PDF]
… The use of ICORs and Financing Gaps at the World Bank was not new. A paper in … capital would automatically lead to a technological spillover (and of just the right amount to give … The Harrod-Domar/Financing Gap shows up not only in the quantitative calculations of …

Closing the efficiency gap: barriers to the efficient use of energyClosing the efficiency gap: barriers to the efficient use of energy
www.sciencedirect.com [PDF]
… The use of ICORs and Financing Gaps at the World Bank was not new. A paper in … capital would automatically lead to a technological spillover (and of just the right amount to give … The Harrod-Domar/Financing Gap shows up not only in the quantitative calculations of …

Duration gap for financial institutionsDuration gap for financial institutions
www.tandfonline.com [PDF]
… The use of ICORs and Financing Gaps at the World Bank was not new. A paper in … capital would automatically lead to a technological spillover (and of just the right amount to give … The Harrod-Domar/Financing Gap shows up not only in the quantitative calculations of …

Funding gap, what funding gap? Financial bootstrappingFunding gap, what funding gap? Financial bootstrapping
www.emerald.com [PDF]
… The use of ICORs and Financing Gaps at the World Bank was not new. A paper in … capital would automatically lead to a technological spillover (and of just the right amount to give … The Harrod-Domar/Financing Gap shows up not only in the quantitative calculations of …

Female finances: Gender wage gaps and gender assets gapsFemale finances: Gender wage gaps and gender assets gaps
journals.sagepub.com [PDF]
… The use of ICORs and Financing Gaps at the World Bank was not new. A paper in … capital would automatically lead to a technological spillover (and of just the right amount to give … The Harrod-Domar/Financing Gap shows up not only in the quantitative calculations of …



Q&A About Gap Amount


Why do lease payments at the beginning of a lease term not fully cover vehicle depreciation?

Lease payments are flat amounts paid monthly over several years while vehicles depreciate in value more quickly when they are newer and because consumers' vehicle lease payments are flat amounts paid monthly over several years.

What can consumers do to protect themselves against losing money because of a gap amount?

Consumers can purchase gap insurance.

How do you measure income and wealth distributions?

You can use the Gini coefficient or the Inequality-adjusted Human Development Index to measure these distributions.

What does """" mean in this context?

"""" means "".

How does the gap amount get calculated?

It gets calculated based on the terms of lease's early termination payoff provision.

What is the gap amount?

The gap amount is the portion of a leased item's value that is not covered by insurance in the event of a total loss from an accident or theft.

What are some types of economic inequality?

There are wide varieties of economic inequality, most notably measured using the distribution of income and the distribution of wealth.

What are some examples of vehicles that have high depreciation rates?

Vehicles with high depreciation rates include new cars and trucks, luxury vehicles, and sports cars.

What is the definition of gap amount?

The gap amount is a measure of economic inequality.