Pricey wheels spur demand for insurance

Low-profile tires and wide alloy wheels look cool. But they're one bad pothole away from a flat tire and damaged wheel, oftentimes at hundreds of dollars a pop.

That's helping finance and insurance managers sell a lot of tire-and-wheel coverage, says Jeff Jagoe, senior vice president of Innovative Aftermarket Systems in Austin, Texas.

Even testers at Consumer Reports agree that tire-and-wheel coverage can be a good idea if you have expensive wheels and you live in a region where potholes are common.

David Champion, director of auto testing at Consumer Reports, says oversize wheels with low-profile tires "took a real bashing" during curb-strike testing for the magazine. If roads are rough where you live, he says, coverage could be a real benefit. "You can spend up to $5,000 on wheels and tires," he says.

Tire-and-wheel coverage can cost up to $600, Jagoe says, but it's a good investment if it covers a typical $1,200 repair job. On a five-year policy, he says, some customers have to replace wheels more than once.

Popular product

Low-profile tires are becoming common, especially on high-performance models like the BMW M, Mercedes-Benz AMG and Chevrolet Corvette and especially in markets like Southern California, where showy wheels are particularly popular.

Jagoe says many of his dealership clients sell tire-and-wheel policies to about 45 percent of new-car buyers. For luxury brands like BMW, he says, penetration approaches 100 percent.

In October, BMW Financial Services began selling its own, private label tire-and-wheel policy, administered by a third-party vendor. Coverage includes outright replacement of tires and wheels when needed, instead of repair. "It has been very well accepted," says Shaun Bugbee, vice president of sales and marketing at BMW Group Financial Services. The company expected fourth-quarter sales last year of about 1,200 contracts, but the number was more than double that, he says, at around 2,800.

Another chance

Factors other than low-profile tires and expensive wheels make tire-and-wheel coverage more attractive.

For dealerships, tighter credit means there's less loan money available to finance aftermarket products on the same contract as the vehicle. But while there may not be enough money in the loan contract to add, say, an extended service plan, there could be room to include a less-expensive, second-tier aftermarket product such as tire-and-wheel coverage, door-ding coverage or paint sealant.

For consumers, who increasingly are keeping their vehicles longer, buying aftermarket coverage that lasts longer than the factory warranty or covers items not covered by the factory becomes more appealing.

Moreover, coverage can be offered to service customers long after the new-car purchase, Bugbee says. "If you change cars every three years and the warranty is four years, 50,000 miles, you may never utilize it," he says. "But if you get to the 40,000-mile point and you decide to keep it another three years, this product can be sold at that point."

You can reach Jim Henry at