I bought GAP insurance on my car. OTD price was $42k, the GAP was $509 or something. Had a preapproval for a $40k loan without any credit check or anything so financed that and wrote a check for the rest. I gave myself a price range of 30-40k before taxes before even applying for a loan, so no I didn't go out and get the most the bank would let me. It just happened that I was preapproved up to the budget I had given myself. Ha!
Anyways, it's a plug in hybrid, and due to tax rebates the value of the car immediately drops almost $5-6k before I even drive it off the lot. I seriously thought about just keeping enough money in the bank to cover a total loss, but to me that would be a really big blow should it get totaled in the first couple of years.
Right now the value is about $28,000 with my current mileage according to KBB. I don't care if that money came from a down payment up front or from an emergency fund after the fact. I wanted to hedge myself against that kind of hit. It's just another form of insurance. The $500 will not be missed much. The $10k plus would be.
I'm sure a financial adviser out there somewhere just pissed their pants reading that. If it's any consolation, I still have my 2001 truck I bought in 2004 to give an idea how long I keep things ;)
I bought GAP insurance because I felt it was worth it compared the amount it's protecting me from losing. I do agree though, that if someone buys GAP insurance because they literally cant afford to pay the difference if they crash the day after purchase, they need a cheaper car. I overheard plenty of idiots in the showroom making really dumb dangerous decisions in my short time during waits in the middle of test drives. Those are the people these "blanket statements" are for. For example, if a $30 fluctuation in your insurance quote might mean not qualifying for the loan, WTF are you doing???
Really though, the best financial decision when it comes to cars is to buy a $4k beater and only have liability coverage and replace it once a $1k repair bill or accident comes up.