<prompt> Human: I ask this question because my nightmare came true. I finally got to the point where I could afford the car I wanted. A brand new Mercedes C63 AMG. Put 25,000 down. Loved every second of owning it. Someone made an illegal U-Turn and hit me. Hard. Airbags deployed. No one injured. Car will likely be totaled. Its less than a year old. The other partys insurance has accepted full liability for the accident. There is 40,000 left on the loan. I have gap insurance, but Im not worried about being upside down. Im still out of a significant portion of my down payment. If I had put 0 down and kept the money in the bank and paid the monthly payment from there, I would have only paid up until the accident, then gap insurance would cover any difference in the check I receive from insurance and the remaining balance. Of course, the monthly payment would be higher, but Id still have cash from the down payment in a separate account. I apologize that Im having a hard time putting my question into words. But if I have the cash in hand and I can get a comparable interest rate with 0 down vs 25k down, why not hold onto the cash to minimize risk in case the vehicle is totaled? I would paid 0 down 9 months 1,400 vs 25,000 down 9 months 900moAssistant: You shouldnt be out your down payment. If they total your car, their insurance will pay for the TOTAL VALUE of your car, not the amount remaining on your loan. Suppose your car is currently worth 55k. Their insurance will pay you 55k.It might help to imagine you paid for your car 100 outright. Assume it cost 70k. You paid a down payment of 70k. Its now worth 55k. The guy hits you, and you get 55 cash. You werent out your whole down payment.Human: Of course, insurance will pay the value of my car before the accident. If that value is less than the balance of the loan, my gap insurance will cover the remaining balance. However in your example, I am out 70k - 55k 15k in one year. So I spent 15k to have a car for a year, then have nothing in the end. I still would have spent less up until the point of the accident if I had saved that 70k in an account and taken out a loan, then made the monthly payments on that loan. Correct? Is this just a probabilityrisk game?Assistant: Ok I had to modify the numbers a bit so they match your scenario. Assume 73.1k purchase price, 55k value at time of accident. Assume 0 loan in both cases. 25k down payment 0 down payment---------Down Payment -25k 0sum of 9 monthly payments -8.1k -12.6kNet out of pocket -33.1k -12.6kRemaining owed on loan you still have to pay this -40k -60.5kInsurance payment 55k 55kNET income minus outflow -18.1k -18.1kIn both cases you are out 18.1k, which is exactly the depreciation on the car 73.1k - 55kI think you are forgetting that after the accident, you still owe the total remaining balance on the car loan. That is much higher in the 0 down payment scenario.EDIT: Now, if you gap insurance kicks in in scenario 2 I have no idea how it works, just googled it, it pays you 5.5k, because you were 5.5k underwater. HOWEVER your gap insurance premium would be much higher in scenario 2 than in scenario 1, since you would be at much greater risk of going underwater. Im actually surprised that you got gap insurance with such a large down payment. It seems like the risk over going underwater would be negligible. Human: Thanks for breaking it down like this. Makes more sense. Gap insurance was incredibly cheap, most likely due to the large down payment. I would imagine the premium would be higher with little to no down payment. So it boils down to chance I guess. If your car is totaled in the first year, youre in a sucky situation either way. I appreciate your help.  <response>: If your car is totaled in the first year, youre in a sucky situation either way.Yup, and the reason is that cars take such a massive depreciation hit in their first year. Even if your car wasnt totaled, your net worth still goes down by 18k. Replace the insurance payout line in my table with asset value 