Glenn Roseman, finance manager at Unicars Honda in Indio, Calif., has cut his price for guaranteed asset protection, or GAP, products by more than half the typical rate to compete with insurance companies' prices on similar products, even though he believes his product is superior.
"A little profit is better than no profit," he said.
Insurance companies are pushing their way into GAP sales, tacking offers onto auto insurance. The list of heavyweight auto-insurance providers seeking to muscle into the GAP business includes Nationwide Mutual Insurance Co., Allstate Corp., Progressive Corp. and USAA. Some have a product similar to GAP but sell it under another name. For example, Progressive offers loan or lease payoff coverage and USAA offers total loss protection.
At this point, most F&I managers believe they offer better-quality products, but an uptick in insurance offers eventually could pose a threat to dealers. As long as dealers and F&I managers prepare for the competition, their business shouldn't be at risk, dealer consultants say.
GAP insurance comes into play when a vehicle is totaled in an accident or natural disaster. If the owner still owes more than the actual value of the vehicle, GAP covers the difference between the actual cash value of the vehicle and the outstanding balance on the loan or lease, so the owner isn't out of pocket.