F&I and Showroom, October 2013
Dealer Profi le Blake and C D Norberg fl ank Chris Waggett F I manager for Woody Anderson Ford in Huntsville Ala Their general agency helped the dealership make the switch to a four tier GAP pricing model in late 2011 A NEW BAND Four tier GAP programs are gaining traction thanks to current auto fi nance trends and dealers who have adopted the pricing structure say theyre leaving less money on the table as a result By Justina Ly T he stretching of loan terms is one of the many auto fi nance trends driving payment conscience consumers back into showrooms Its also allowing some providers agents and dealers to test a new wrinkle on a core F I product Since its introduction in the 1990s guaranteed asset protection GAP has primarily been sold based on two and three tier pricing models Within the past couple of years though some dealers have switched to a four tier structure to match GAP pricing and coverage to current fi nance trends including the uptick in approvals for auto loans of 63 and 22 F I and Showroom October 2013 75 month terms Data on 63 and 75 month terms wasnt readily available from Experian Automotive but the fi rm did note that the fi rst sign of fi nance source loosening terms dates back to the fourth quarter 2010 Thats when the average term for new vehicle fi nancing reached 63 months Last quarter the average term on new vehicle fi nancing sat at 65 months with the 61 to 72 month term band accounting for 417 percent of all new vehicle fi nancing during that period However the segment that experienced the biggest increase in share was the 73 to 84 month band which jumped 251 percent from a year ago to 195 percent of all new vehicle loans Providers of debt cancellation products say adoption of the fourtier pricing structure is still relatively low but they add that dealerships that have made the switch are enjoying increased acceptance rates for GAP as well as better profi tability They believe adoption levels will only increase if auto fi nance continues on its current path Profi t Driver In the event of the total loss of a vehicle GAP covers the difference between the depreciated value of the vehicle and the owners unpaid loan balance A traditional two tier model
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