Generally speaking, aside from a home, a vehicle is the most expensive asset your borrowers are going to purchase. Adding Major Mechanical Protection Insurance (MMP), also know as an extended warranty, to your product lineup and extending this option to your customers is a mutually beneficial way to provide added protection to your borrower's vehicles—particularly used vehicles—while generating significant fee income for your institution. If you're not sold on the mutual benefits on MMP, read below to learn four reasons why you should offer MMP to every one of your used auto loan borrowers.
- Save your borrowers money
Having a vehicle breakdown can be a stressful and expensive situation for your borrowers. It is also virtually inevitable. The longer your borrowers drive their vehicle, and the more miles they rack up, the chance of experiencing a mechanical breakdown increases. And, the cost of automobile repairs is only going to increase as time goes on. According to the 2013 CarMD Vehicle Health Index, in 2012 the average repair cost on a vehicle rose 10%, replacement parts rose six percent, and labor rates rose 17%.
By simply informing your borrowers of the financial liability they could face due to an issue with their used vehicle, they will see that you are not only selling them protection with an MMP policy, but also peace of mind.
- Build loyalty
Picture this: your borrower's car breaks down. When they take it to their local mechanic, they learn that their transmission needs to be repaired, and are given a quote of $1,800. As they struggle to wrap their mind around how they are going to come up with the money they need to repair their car without draining their savings, they remember that their loan officer sold them on the benefits of an extended warranty, like MMP, and this repair will be covered! Guess who the hero is? There is no better way to have your member become loyal to your institution than to be the "white knight" in times of stress and tragedy.
- It is a smart product to cross-sell
If your borrower has already trusted you to be their auto lender, they will likely trust you enough to heed your advice on the importance of an extended warranty. If your borrower is purchasing a used vehicle, a short conversation about the risks of not carrying an MMP policy and the substantial cost of a dealership-issued extended warranty, should illustrate the value of this product. By simply informing them of the significant expense they could face by not carrying extended coverage to protect their used vehicle, your borrowers will see that you are not only selling them protection, but also peace of mind.
MMP and used auto loans go hand-in-hand. Your loan officers should provide your borrowers with the necessary details and a quote at the close of every used auto loan.
- Generate fee income
When compared to the cost of a major mechanical repair, an extended warranty is a low-cost product to both you and your customers, and it can generate significant ancillary revenue for your institution. Generating quotes can be done quickly and easily, and the premiums your borrowers pay can create a steady stream of revenue flowing into your institution if added to each auto loan.
Like a home or any other major purchase, a vehicle is an investment that should be fully protected—even when the manufacturer's warranty expires. MMP is an easy way to give your borrowers the assurance they need to know that they are protected in the event of a mechanical breakdown. It's a win-win for both you and your borrowers!