Some finance companies require gap insurance if they are financing the entire amount. But, you have a $5,000 down payment. Find out what is the threshold where gap insurance is not required. I would guess, it is probably 25% of the purchase price.

Some finance companies build it into their package. Two cars ago, I financed my SAAB through GMAC. GAP insurance is included in all GMAC loans. Six months after I took delivery of my car I was in a serious car crash and my SAAB was a total loss. My personal insurance immediately paid out $30K. I still owed about 4K. The GAP insurance covered the 4K.

You can also find out what your own auto insurance company would charge for GAP. $700 a year sounds high. Or, is this over the life of the loan?