There's a new type of guaranteed asset protection contract available for sale at dealerships. It's called Trade-in GAP.
Normally, GAP protects customers who owe money on a car that has been totaled or stolen. Trade-in GAP protects customers who want to buy another car but are upside down on their trade-in.
The dealer cost is $275 to $625, depending on the term and coverage. Trade-in GAP is available on terms of 24 to 72 months and coverage up to $5,000 on new vehicles and up to $3,500 on used vehicles.
As another option, dealers can offer complimentary $1,000 trade-in coverage on all purchases and up-sell additional coverage up to $5,000. The blanket coverage program costs dealers $99 to $450.
Tony Wanderon, CEO of Family First Dealer Services in Jacksonville, Fla., is pioneering the concept. Wanderon used to head Allstate Dealer Services, a major GAP provider.
Wanderon said the new program could fetch dealers a markup similar to that of typical GAP or vehicle service contracts, $200 to $500.
Wanderon's new program is insured by Wesco Insurance Co., which is rated A, excellent, by rating service A.M. Best of Oldwick, N.J.
Wanderon says 10 large auto retailers have signed up to offer the product starting Sept. 1. He thinks the product will become as important as GAP is to the F&I business.
A small percentage of people total their cars or are victimized by auto thieves. But Wanderon says about one in three customers are buried on their trade-in when they return to buy another car.
The product could have fairly broad appeal. And I'm sure dealers will like the fact that it boosts customer loyalty.