GAP Investment Strategies 2

Question 1

A customer finances a $38,000 vehicle with 10% down and a 72-month loan. Which factor most increases their GAP exposure during the first 18 months?

Accepted Answer

Low down payment combined with rapid early depreciation

Answer

A low down payment means the customer starts with minimal equity, and rapid early depreciation (vehicles lose 15–25% in year one) creates the largest gap between loan balance and ACV.

Question 2

From an F&I product portfolio investment perspective, which customer profile represents the BEST GAP sales opportunity?

Accepted Answer

Customer rolling negative equity from a prior loan into a new 84-month finance contract

Answer

Rolling negative equity into a new loan immediately creates a significant gap between ACV and the inflated loan balance, making GAP coverage highly relevant.

Question 3

When evaluating GAP as part of a dealership's F&I product investment strategy, what metric best measures GAP program profitability per retail unit sold?

Accepted Answer

GAP penetration rate multiplied by average gross per policy

Answer

Penetration rate × average gross profit per policy directly measures how much GAP contributes to per-unit F&I revenue.

Question 4

A GAP waiver product is typically structured as an addendum to the retail installment contract. What investment advantage does this structure offer the dealership?

Accepted Answer

It enables the dealer to retain profit without ceding it to a third-party insurer

Answer

A dealer-owned waiver addendum allows the dealership to retain the profit margin rather than sharing it with an insurance carrier, improving F&I investment returns.

Question 5

Which vehicle type generally presents the highest risk of a large gap between loan balance and ACV, making GAP coverage most critical from an investment protection standpoint?

Accepted Answer

Luxury sedans with high initial MSRP and fast depreciation curves

Answer

Luxury sedans depreciate rapidly—often 30–40% in the first year—creating a large gap that persists throughout a long loan term.

(GAP) Guaranteed Asset Protection Certified Practice Test

(GAP) Guaranteed Asset Protection Certified Practice Test

GAP Investment Strategies 2