by Bryan Nieves, AUL Corp.
AUL vehicle service contracts—also known as extended warranties—offer a unique opportunity for auto finance providers to positively impact portfolio performance and overall profitability in many ways. Rarely can a single product or program have such a dramatic impact on multiple core finance operations, but AUL can and does, and that’s exactly what makes AUL the trusted partner of more than 70 auto finance providers across the nation.
Here’s just a few ways a successful AUL service contract program can work for you:
- Providing Customers with Superior Value
By directly managing vehicle service contract programs and product financing terms, AUL Lender Partners can ensure that their customers receive valuable mechanical breakdown protection at a fair price. Dealerships may not offer the kind of coverage that most benefits customers and lenders and they often prioritize dealership profit over product quality or the customer’s best financial interests. AUL Lender partners are uniquely positioned to maximize the value of vehicle service contract programs for consumers. That’s good news, since Federal and State regulators now look to auto finance providers to take an active role in consumer protection compliance.
- Reducing Delinquencies & Preserving Collateral Value
Customers count on their financed vehicle to get to them work and most are reluctant or unable to make loan payments for a car they can’t drive. That’s why the most important benefits of an AUL vehicle service contract program are the critical-component mechanical breakdown protection and award-winning customer assistance that our mutual customers enjoy in the event of an unexpected repair or roadside emergency. Keeping our customers’ vehicles on the road helps keep them current with their auto finance obligations. For AUL lender partners, that means delinquencies are reduced, repossessions avoided, and collateral values preserved.
- Adding New Fee Income and Increasing Interest Income
AUL vehicle service contracts offer an opportunity to add modest “Fee Income”—the difference between net contract cost and customer retail cost—to qualifying loans and collateral. With custom AUL product design and affordable contract options, AUL lender partners can offset loan risks and earn additional profits on loans for customers who elect to purchase a service contract.
Loans that include financing for AUL vehicle service contracts provide increased interest income opportunity based on larger principal balances. AUL lender partners add incremental interest income profitability without even increasing loan volume.
- Service Contract Claim Reserve Profit Participation
AUL lender partners can enjoy 100% participation in AUL service contract claim reserve underwriting profit and claim reserve investment income. Transparency is critical when it comes to participation programs like retros and reinsurance structures, and AUL is a partner you can trust: contract costs, fees and claim reserves are fully disclosed to lender partners, and every dollar you entrust to AUL is accounted for.
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