Reducing Auto Risk for Your Borrowers

How Guaranteed Auto Protection and Vehicle Service Contract products can help.

 

By Transamerica

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Few people plan ahead for a large repair bill, even though the likelihood that one will occur in their vehicle’s lifetime is immense. And losing a vehicle to theft or irreparable damage can wreck an already stretched budget. By offering the protection that Guaranteed Auto Protection (GAP) and/or Vehicle Service Contract (VSC) products provide, you can help protect your borrowers from a future stressful scenario and offer a more positive member experience.

After a home, a vehicle is usually one of the largest purchases most people will make. With thousands of dollars riding on four wheels, it’s important to make sure that investment is protected. By knowing what risks are out there, how likely they may happen, and what products can help defer the costs of those risks, credit union’s will be greater positioned to meet a borrower’s needs and present a more positive member experience.

When a vehicle is fresh off the showroom floor, it has that new car smell and everything seems to work perfectly. However, the impact of depreciation causes a gap in the loan to value of the vehicle. Should your borrower experience either an accident or a theft situation, they may owe a large amount of money to you while also dealing with replacing their automobile.

Guaranteed Auto Protection

GAP coverage can be beneficial to your borrower if their loan has an exposure gap. With GAP, should the vehicle be stolen or damaged beyond repair, the difference — or the gap — between the value of the vehicle and the outstanding balance of the auto loan or lease is paid up to the waiver addendum maximum.  And because one in seven vehicle accidents end in a total loss, and nearly one million thefts occur each year, GAP can be very valuable.

As a car ages, depreciation slows substantially and the value to loan ratio balances; however, older vehicles come with their own set of problems. This is when maintenance costs rise and manufacturer warranty’s no longer apply. When the pings, clicks, and hisses start, and the warning lights flash, drivers get nervous about what expenses are on the horizon and how they will be able to pay for them.

Vehicle Service Contract

A VSC is designed to help protect your members after a manufacturer's warranty expires. Many borrowers do not have hundreds or thousands of dollars set aside for vehicle repairs. Therefore, a VSC pays for parts and labor for covered repairs or replacements that may be required, and are designed to protect borrowers and their investment when there is not much time to plan and costly repairs are needed.

Considering that the average hourly rate for mechanic labor is over $100 an hour, and parts and systems are expensive to fix, there is a strong value proposition for VSCs. Beyond that, just knowing that many repair costs will be covered can ease the borrower’s mind.

But your members aren’t the only ones that will benefit. By adding GAP and VSC products to your portfolio, you can improve your overall business:

  • Avoid large losses due to members’ property being damaged, stolen, or irreparable
  • Be covered for the loan balance from a company and protect the investment
  • Achieve financial objectives with less risk
  • Motivate staff by providing new skill sets, goals, and expanding sales safely
  • Grow business, create strong customer relationships, and grow fee-income opportunities

Few people are prepared for a large auto expense. But by offering GAP and VSC products, your financial institution can help protect your borrowers from that unhappy scenario. You will also be able to embrace more sophisticated and disciplined marketing processes through education and member support.

A vehicle is a large investment and the longer it stays protected, the more value your borrowers will get from their purchase. Keep your borrowers covered and add value to your member relationships.

Transamerica Financial Solutions Group can help you provide the personal member–centric experience previous generations of member have praised, while fusing that with the technological innovations tech-savvy borrowers crave. Our dedicated and experienced professional team delivers optimal solutions to businesses by valuing the organization’s vision as well as their members’ needs, preferences, and buying behavior. We will be happy to help you design a plan that will help you succeed.

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Transamerica companies provide insurance products and services. Through the Life & Protection division, the Transamerica companies offer a wide array of life and health protection solutions with a common purpose: to protect families and their dreams.

As part of the Life & Protection division, Transamerica Financial Solutions Group caters to the needs of credit unions, community banks, and larger financial institutions. Our portfolio consists of Insurance and Protection Products (including GAP & VSC), Customer Growth and Support Strategies, Technological Solutions, Research, and Training.

This sponsored content article is provided to the credit union community for shared insights and knowledge from a recognized solutions provider in the industry. Please note that the views and opinions offered here do not reflect those of Callahan & Associates, and Callahan does not endorse vendors or the solutions they offer.

If you are interested in contributing an article on CreditUnions.com, please contact our Callahan Media team at ads@creditunions.com or 1-800-446-7453.

 

Aug. 4, 2014


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