Fifth Third Bank has raised the amount of GAP coverage it will finance, describing it as a response to demand, rising prices and national competitors.
Fifth Third National Sales Manager Terry Gilmore told the Ethical F&I Managers Conference on Sept. 22 that his bank would now advance up to $1,200 instead of $995.
Gilmore said the bank had received requests for such a change. He also said the move brought his bank more in line with its competitors.
"We had heard a lot of that from our national partners," Gilmore told Automotive News on Sept. 28.
The price of GAP had increased and eroded dealer profit margins on the product, he said. He said when he started in the business, the cost of GAP fell in the "high $100s," but a vehicle contract involved $17,000 rather than $30,000 like today.
According to statistics from StoneEagle, which aggregates F&I data from at least 40 percent of dealerships, customers are paying an average of $881.27 for GAP this year, up 12.4 percent and an increase of nearly $100 from 2018's $784.05. GAP penetration increased from 42 percent in 2018 to 46 percent during that time.
"The cost of GAP keeps climbing," Gilmore told the conference. "Why? Because people use it."
Courtney Hoffman, senior vice president of mergers and acquisitions at National Auto Care, said such coverage had been underpriced for several years compared with the risk and hit GAP providers with "challenging losses." But because of the recent rise in used-vehicle prices, "I think you're seeing some stabilization" in terms of cost to providers, she said.
Wells Fargo Auto spokeswoman Natalie Brown confirmed last week that her bank had also increased GAP financing to $1,200.
"The actual amount we'll finance as part of a consumer's loan will depend on state law, the value of the collateral they're financing and the consumer's overall ability to repay the loan," she wrote in an email. "We made this change primarily to accommodate for the higher cost of these products by the product providers."