by Laurie Giesen
Job assurance programs, which let customers “walk away” from cars they still owe on if they lose their jobs, are generating greater sales for car dealers, adding to the used-car pool. Consider Hyundai Motor USA, which is one of the biggest players to offer such a program. It reports significant gains in car sales as the result of its Hyundai AssurancePlus program. Specifically, after five months of offering the program at nearly 800 dealerships nationally, the number of cars returned through this program amounted to less than 15, Hyundai reports. Meanwhile, the company attributes a 10 percent sales gain to the program.
“This was more of a marketing program than an insurance program,” says Chris Hosford, a spokesperson for Fountain Valley, Calif.-based Hyundai, explaining that Hyundai never expected to see a lot of cars returned, but rather hoped to give car buyers a feeling of security so they would be more comfortable in making a purchase. “Our research before this program showed that job security was a major factor in most car buyers’ decisions. Even with today’s high unemployment rates, 90 percent of people who want a job have one. But even those people with jobs are often worried about the future of their jobs, and it is an understandable fear,” Hosford says.
Under the job assurance program, consumers can return any new Hyundai, leased or financed in 2009, if they unexpectedly lose their income within one year of the purchase date. Although there are numerous factors that go into car-buying decisions, company research estimates that 10 percent of Hyundai sales since February, when Hyundai announced the offering, came from people who would not have purchased a car without the assurance program, Hosford says. While Hyundai is the only major auto company in the United States allowing car buyers to return their purchases as part of a job assurance offering, Walkaway USA, a division of EFG Companies, and Hyundai’s partner in its assurance program, also offers a similar program through 100 independent car dealerships in the United States and has just recently begun marketing its offering to auto finance companies, according to Jeff Beaver, senior vice president of marketing for Walkaway USA.
The number of cars actually returned so far is small, says Beaver, who wouldn’t provide an exact number. And although Walkaway has only been offering the program in the United States for about one year, it is modeled after a similar offering in Canada that has been around for a decade. During those 10 years, car dealers have allowed consumers to walk away from $36 million in auto debt, Beaver says. He declines to say how many cars that involved.
In both the U.S. and Canada, the returned cars go back to the dealership where they were purchased. In most cases, the dealers choose to resell the cars directly, Beaver says. Experts in the remarket industry confirm they have not seen many cars coming from the job assurance programs. “I have not noticed any volume from these programs, nor have I heard of anyone else who has,” says Tom Kontos, chief economist for Carmel, Ind.-based ADESA. “It seems to be a nice marketing tool in that it gives auto buyers peace of mind knowing that they can return a car. But few actually appear to do so.” Kontos notes that Hyundai, as the only major auto company offering the feature nationwide, has only a 4 percent market share in the U.S. Even if a larger number of Hyundais were returned, it would not be as significant as when a larger auto company made the offering, he adds.
