Skyrocketing Used Car Prices Drive Record Sales of Vehicle Protection Policies
With new car sales being constrained by the global computer chip shortage, used car sales and pricing are skyrocketing, according to J.D. Power and the U.S. Labor Department. As a result, AUL Corp, which is one of the nation’s leading automotive warranty and service contract providers, recently reported record sales in the first half of 2021, a 44% increase over 2020. “This increase in sales is due in large part to people wanting to protect what has changed from a depreciating asset to what is now an appreciating one, combined with the increasing complexity of today’s technology focused vehicles,” explained Jimmy Atkinson, AUL’s President and CEO. “The resulting high prices for used cars and trucks are driving more owners and buyers to purchase coverage plans to ensure their vehicles stay on the road longer.”
Driven by a perfect storm of unique market conditions; worldwide microchip shortage, rental car fleet depletion, pandemic reopening and more, used car prices have reached an all-time high. According to J.D. Power, the average used car price surpassed $25,000 for the first time in April 2021. And in the case of very popular makes and models, the sticker prices are higher even than when the vehicles were new. And similar to what they do with other large investments, growing numbers of consumers are looking to protect their vehicles with policies that limit large repair bills down the road.
Another financial incentive for consumers to consider a vehicle warranty or service contract is the rising cost to repair the increasingly complex technology systems found in even the base models of vehicles. From lane assist to automatic braking, rearview cameras to navigation, Apple Car Play and Android Auto, these systems are driving the cost of repairs ever higher.
“Due to the pandemic, dealers were forced to handle most vehicle sales transactions entirely online and in doing so, introduced buyers to vehicle service contract options earlier in the sales process. This extra time has worked to the benefit of buyers, allowing them to do their research and make informed decisions about which policies were the best fit for them ahead of time,” stated Atkinson.
These factors and more have combined to create record demand for peace of mind on the road via warranty and service contract policies. As a full-service finance and insurance product provider, AUL Corp sells a full suite of automotive protection policies though a national network of dealers, agents, and financial institutions and is in a position to see changes in sales velocity first-hand. AUL’s policies include vehicle service contracts (VSCs), extended warranties, technology systems coverage, GAP coverage, theft protection, tire and wheel protection, key replacement, roadside assistance, scratch repair, pre-paid maintenance packages, and more.