Hyundai Motor Co., seeking to overcome low consumer confidence, says its US dealers are seeing quick results from an offer to partially reimburse customers if they lose their jobs.
The “Hyundai Assurance” program, launched January 2, applies to buyers who finance their purchases. In essence it’s an insurance policy that covers the loss of ability to pay for a new car due to unemployment, personal bankruptcy, accidental death, disability or job transfer overseas.
Hyundai had found job-loss concerns were outweighing rebates, cut-rate financing and other incentives. US light- vehicle sales fell last year to the lowest level since 1992 even as incentives continued to rise. Automakers spent almost a third more on discounts per vehicle in the fourth quarter than they had a year earlier, rising to a record $3,244, according to market researcher J.D. Power & Associates.
“Early returns are positive; unit sales are up over December and January a year ago in the 20 percent range,” said Dave Zuchowski, vice president of sales. “We’ve hit a chord with consumers.”
Within a week of the offer, some Hyundai dealers reported a surge of showroom traffic, as well as stronger sales, Zuchowski said. The early response to Hyundai’s promotion suggests motorists are delaying vehicle purchases mainly because they expect income loss and the current 7.2 percent US unemployment rate to worsen.
A sustained consumer response could give the South Korean automaker a leg up over competitors that have been pushing discounts to jump-start sales. The idea stemmed from interviews with potential car buyers held in November, said Joel Ewanick, Hyundai vice president of marketing.
New-car shoppers talked about the potential loss of their jobs as the No. 1 reason preventing them from deciding to purchase. Fifty percent of respondents said they planned to defer vehicle purchases because of concerns about the economy, Zuchowski said, adding: “Most good ideas are borne of desperation.”
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“You bring the car in, we do an appraisal and we pay you the difference between the appraised value and the balance on your loan,” said Zuchowski. The maximum payback is $7,500.
Vehicles typically lose significant value as soon as they are driven off the dealer’s lot, yet many first-year Hyundais could be worth more than the insurance covers.
Hyundai, best known for low-price cars, now offers a car that aims to compete with luxury models. Last year Hyundai began selling the Genesis sedan, which starts at $32,250, according to car-shopping Web site Edmunds.com.
It was named the North American Car of the Year on Jan. 11 at the North American International Auto Show in Detroit. Its 2009 model-year lineup starts with a $9,970 Accent, according to Edmunds.com.
Hyundai hired Walkaway USA LLC, a division of closely held EFG Companies of Irving, Texas, to supervise the promotion. Walkaway sells similar unemployment-insurance programs through individual dealers.