As the demand for used vehicles continues to rise, so does the need for longer-lasting protection plans to go along with those pre-owned purchases.
Dealers across the country have started to see increased interest in not only used cars, but high-mileage used cars. According to Susan Carpenter of Spectrum News , the reason for this phenomenon is that “vehicles have never been less affordable. A decade ago, 55% of all cars sold had a manufacturer’s suggested retail price below $30,000; just 6% were priced above $50,000. Today, it’s reversed: 16% of all cars sold have an MSRP of less than $30,000; 35% cost more than $50,000.”
Due to the ongoing price hikes, the lower-end buyer is now more likely to be pushed out of the new vehicle market and into the used vehicle market. According to Carpenter, “Individuals with incomes of $50,000 or less are buying fewer vehicles, both new and used. In 2016, such buyers made up 40% of new vehicle sales and 55% of used vehicle sales. In 2022, they account for 25% of new vehicle sales and 38% of used.”
Consumers are now searching for ways to extend the life of their vehicles for as long as possible. So, what does this mean for F&I managers? It means that now more than ever, there is a need for used vehicle service contract programs that include longer terms and higher mileage maximums.
Your customers are starting to drive older cars with higher odometer readings, which means they need reliable protection that will withstand the life of their vehicles. Like it or not, older vehicles with higher mileage eventually need repairs, which can be very costly and usually unexpected. Without the proper protection provided by an extended vehicle service contract, your customers could get stuck with a very expensive bill.
According to Jim Gorzelany of Forbes, the ongoing supply issues have caused prices in both the new- and used-vehicle markets to skyrocket, leaving many households with no alternative but to keep a trusted ride running. With typical car repair bills of around $406 in western states and $366 in midwestern states, now is the time to provide customers with protection that can help alleviate those costs.
A complete coverage protection plan should allow dealers to offer customers options such as a 12-month/12,000-mile add-on for any age vehicle, or 60-month/100,000-mile coverage on any qualifying vehicle up to 20 years old and up to 200,000 miles on the vehicle at the time of sale.
Another option is an a la carte style of customizable coverage that allows your customer to enhance their coverage level to the components of their choosing. Additional benefits could include towing and rental assistance as well as 24/7 access to roadside assistance with no annual fee.