Why Toyota Financial took its time to launch branded tire-and-wheel

Miller: At some point we will probably survey our dealers again and assess what they're selling on menus and assess where we can add value.
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Editor's note: An earlier version of this story misstated when Toyota Financial Services introduced certain F&I products. Toyota Financial Services introduced extended-service contracts, GAP and prepaid maintenance several years before it added excess wear-and-tear policies for leases in 2012, and tire & wheel policies this month. 

Toyota Financial Services gave Lexus and Toyota store F&I managers a fifth branded product to sell this month with the launch of tire-and-wheel coverage.

The captive finance company already offers Toyota- and Lexus-branded extended service contracts, GAP, prepaid maintenance and excess wear-and-tear coverage for lease customers. The Toyota-branded products are available to Scion customers, too.

Toyota Financial lagged other automotive brands in providing branded tire-and-wheel plans, including BMW, Mini, Ford, Hyundai, Mercedes-Benz and Subaru.

But Jim Miller, Toyota Financial’s national manager of product development, says the company took its time launching tire-and-wheel partly because the business space for the product was in turmoil when the company first started looking into it. Around the industry, high claims made tire-and-wheel a money-loser for some providers, he says.

Toyota Financial’s tire-and-wheel coverage is administered by Safe-Guard Products International in Atlanta.

Miller talked about Toyota Financial’s F&I product strategy with Automotive News Special Correspondent Jim Henry.

What’s the background on tire-and-wheel?

Three years ago we listened to our dealers and we saw the need to add new F&I products to the three core products we already had: vehicle service contracts, GAP and prepaid maintenance. We were deficient in a sense because we didn’t have tire-and-wheel or excess wear-and-use. The first one we addressed was excess wear-and-use. This March it will be about two years. It’s lease-only, of course. Then we went to work on tire-and-wheel.

So you’ve been working on tire-and-wheel for nearly two years?

I’m the first to admit we’re late to the tire-and-wheel party. But we wanted to evaluate what’s already out there in a big way. We validated that yes, it really is a core F&I product. Depending on where you locate it, it could be fourth or fifth in sales on a menu.

All customers can use it: retail, cash or a lease deal. It was pretty easy for us to see enough dealer demand for it.

It’s a busy space.

There have been a lot of people coming and going from the product and a lot of price changes. You really didn’t have price stability until the last couple of years. For many providers, losses were exceeding the reserves.

Are you looking at adding more branded products, or are you set for a while?

We believe there are five core products: service contracts, GAP, prepaid maintenance, lease protection and tire-and-wheel. At some point we will probably survey our dealers again and assess what they’re selling on menus and assess where we can add value. We don’t want to just put something out there for the sake of putting something out there.

Are there any front runners for the next product?

There are a lot of other products we could put out there. We’re going to be very prudent and careful about doing that. The one you hear a lot of noise on is key replacement. I can’t say it’s going to be next year, but we will be taking a look at it. One of the things you have to look at is whether to build it as a stand-alone product, or do you build it as a benefit, part of a package that you do with something else?

Do you offer products such as fabric protection, exterior finish and the like?

There are a lot of smaller products to chase. I’m not sure we want to go there. There are no plans to go in that space.

What’s your sales penetration?

We don’t normally share that information. I’d love to tell you, because I think we do well. Dealers see a lot of value in the products. I won’t say every dealer sells our products, but a lot do.

You can reach Jim Henry at autonews@crain.com.

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