GAP claims are rising. What products are you offering? How are they going to impact you and your customers?.
GAP claim are rising: The influencing factors
GAP claims are designed to protect consumers by paying the difference or the gap between the value of a vehicle at the time it is totaled. That is, stolen or not recovered vehicle value and the balance owed to the loan. For dealers, the product helps customers who suffered from the total loss back to the market for a new car. To emphasize, the frequency of GAP claims is rising to new levels. This could mean both your dealership and your customers could be at risk of significant and unnecessary hits.
FI magazine reported: Between 2014 and 2018, the average new-vehicle GAP claim payout grew 19.5% or 4.7% per year. For used vehicles, in the same timeframe, the GAP payouts increased too. It rose by 18.5% per year, and producing a four-year total increase of 95%.
Experts blame factors such as insurance companies becoming more likely to total vehicles due to rising replacement parts complexity and related costs. In addition, a greater number of complex vehicles on the road, higher collision rates, and a rash of severe weather events add to the claims surge. A high growth in GAP claims could also be a result of high car prices. This means, customers are paying too much for cars due to the rising costs because of inventory shortage. Therefore, it is critical to ensure that the products you are offering will provide higher coverage to your customers in a situation like this.
It is essential to consider why better GAP coverage is critical for your customers and you as dealership personnel.
• GAP coverage protects your customers if they owe more on their loan or lease than the value of their auto at the time of loss.
• The need for the coverage is increasing. Consumers are willing to pay more for vehicles they desire and are ready to accept longer terms and higher interest rates to obtain those vehicles.
• Discussing this difference in GAP coverage with your customers upfront prevents difficult conversations in the event of a claim.
What should you offer:
Could you be offering something with higher value, better coverage, and less risk to you at the same price? GAP with a 120% LTV vs. GAP offering 150% LTV makes a considerable difference may be nearly the same in cost. The right GAP product will improve coverage for your customer, your relationship with them and better protect your profits.
Consider the following comparison between the two typical GAP offerings, namely GAP 120% LTV and GAP 150% LTV, and which coverage would benefit you and your customers more.
GAP analysis chart for your and your customer’s benefit
Year one GAP risk evaluation:
The comparison between the 120% LTV and 150% LTV clearly shows that 150% LTV GAP coverage would benefit your customers significantly.
Not every customer might fully understand the difference or the benefit of choosing one coverage over the other. Hence, demonstrating the math would give much-needed clarity. Significantly, showing genuine interest to your customers in helping them choose the better plan. It would build trust and foster loyalty in them towards you and your dealership.
On the other hand, as dealership personnel, it would save you valuable time. Moreover, it will help you avoid uncomfortable dialogue with your customers when they file for a GAP claim.
Stay Ahead of Marketing Tides
The PRO team specializes in identifying opportunities like this to make sure you stay ahead of market tides that could affect your profit. Contact us for the inside scoop on what makes a GAP product work for everyone.