GAP stands for “Guaranteed Auto Protection.” Such insurance is indeed important when leasing or financing, since you don’t actually own the car and usually don’t put down a large down payment. If you have an accident, your insurance will pay you the current market value of the car, but not the total amount of what you owe the finance company. This leaves a gap in your coverage, and an amount that you still have to pay.
Car dealers traditionally sell GAP insurance in the finance and insurance office as the sales contract is being prepared. Dealers typically charge $600 or more for GAP insurance, though the cost generally grows to a total of $800 over time once you figure the interest that’s charged. However, many auto insurance companies offer GAP insurance for up to 70% less and it provides coverage for the entire term of the loan.