Pandemic Prompts Return of Notable Car-Buyer Protection Plan

F&I provider EFG Companies has reintroduced the automotive protection plan behind the original award-winning Hyundai Assurance program that aimed to ease car-buyer fears during last decade’s recession.

Called Walkaway, EFG’s plan lets vehicle purchasers, under specified circumstances, return their purchases and walk away from negative equity.

Last month, Hyundai launched a revised Hyundai Assurance program in which the brand will make up to six months of payments for people who have lost their jobs after purchasing or leasing a new vehicle through Hyundai Capital. That program runs through April 30.

Walkaway goes deeper than that. It gives consumers the option to return their vehicle in the event of unforeseen circumstances including involuntary unemployment, physical disability, loss of driver’s license due to medical impairment and self-employment personal bankruptcy. If a car owner dies, his or her family can return the vehicle.   

EFG is offering Walkaway not directly to consumers but to dealers and automakers, positioning it as protection they can give customers gratis to enhance the likelihood of a vehicle purchase.   

It seems like a plan for the times, considering the economic fragility brought on by the COVID-19 pandemic, say

John Pappanastos resized Headshot

In a Wards Q&A, he talks about the program, its intent to abate consumer anxiety, its underwriting risks and more (including how the insidious coronavirus has infected some of his family members). Here is an edited version of the interview.  

Wards: Are you pitching Walkaway as an F&I product?

Pappanastos: It’s not really an F&I program. It’s involuntary unemployment coverage. It’s designed to drive traffic to the dealer showroom. Our phones have been ringing off the hook. Dealers are interested. They are looking for something to reenergize their operations.

Right now, uncertainty in the market is probably the highest in our lifetime. It’s pushed consumers into a paralysis. This program helps consumers get over the anxiety they are experiencing.

We’ve been offering it through credit unions since the recession and in Puerto Rico, which has had 15% to 20% unemployment.

Wards: So, it’s been around even though EFG says it is re-launching it?

Pappanastos: Relaunching means we’re offering it to auto dealers and OEMs in the U.S. again. We had not been since after the great recession, because there hasn’t been much job-loss anxiety. Until now. 

This covers seven different events. The key to underwriting it is understanding what the claim severity and frequency is for each of the seven. It’s not just unemployment. Unemployment is the message-getter.

Wards: I was told relatively few people made claims under the original recession-era plan you did for Hyundai.

Pappanastos: You’re right. The number of claims is about what we expected. They weren’t high, but they were high enough for us. We didn’t have a single consumer complaint. We did have a lot of heartfelt testimonials from people who made claims. When they needed it, it was there.  

Wards: It seems that people who think they might lose their job aren’t going to buy a car, whether or not it comes with a job-loss protection plan.

Pappanastos: That’s not what 2009 proved to us, although you make a great point. We factor into the underwriting that the number of people buying cars will be lower because of the potential of job loss.

No one wants to buy a car with the hope of returning it. Unless I have high confidence, I don’t want to buy a car. But that’s not really what happened in 2009.

Wards: What happened?

Pappanastos: Within a year of rollout, Hyundai was able to grow unit sales by 8% while the rest of the industry was off 21%. The program influenced someone to buy a car.

Wards: Is it sold through the F&I department?

Pappanastos: No. The vehicle-return program is designed to give the dealer a unique marketing message.

Wards: To be clear, it is not sold to the customer in the F&I office or anywhere else? It just comes with the purchase?

Pappanastos: That’s right. It’s called lot-loaded. It comes with every sale. It’s complimentary, paid for either by the dealer or the OEM. This is a marketing program to provide the dealer with a differentiated message.      

Wards: Do you see this as being a permanent program or is it more crisis-oriented?

Pappanastos: It could be permanent. The price could come down if the risk dissipates. Right now, there’s a tremendous amount of risk, and the underwriting is uncertain. This is not a typical economic downturn.

Wards: It could be a program that you put away when a crisis abates, and then bring it back out for the next crisis, whatever and whenever that may be.

Pappanastos: The program has marketing-message value, and many dealers are desperately looking for that.

Wards: The auto industry is a cyclical business, but I doubt anyone expected sales to plummet because of a virus.

Pappanastos: I’m confident we will have a (coronavirus) treatment by the summer. That’s the key, more so than social distancing and at-home sheltering.

My brother, who’s 56, had this disease. He’s better now, but he was in bed for 16 days and had a fever of 102-plus for 14 of those days. He was in awful shape.

It came into the family from his youngest teenage son who plays soccer. The older teenage son and mother then caught it. The three of them were down for two or three days. Then it hit my brother in a big way. It affects people differently.