In today’s difficult economic landscape, Americans are grappling with increasing affordability challenges. The dual pressures of inflation and high prices on essential goods and services are eroding consumer spending power and making it harder for individuals to manage their finances effectively.
Affordability is an issue across the board from cars to cheeseburgers. For instance, the president of McDonald’s recently revealed that the average price of a Big Mac meal today is up 27% from 2019. The price for a 10-piece McNuggets meal is up 28% over the same period, and the price of medium french fries increased 44%.
A significant amount of financial strain is felt in the automotive sector. Like many consumers, credit union members are holding onto their vehicles longer due to high vehicle costs and interest rates. However, as vehicles age, the likelihood of needing costly repairs to keep them road-ready increases. According to S&P Global Mobility, the average vehicle on the road is now a record 12.6 years old, meaning many drivers face the possibility of expensive repairs as their cars age.
This scenario underscores the critical need for credit unions to offer added services, such as vehicle protection plans, to help members navigate these affordability issues.
The rising costs of vehicle maintenance
One of the most pressing concerns for credit union members is the escalating cost of vehicle maintenance. The price of repairs, parts, and labor has been steadily rising, with no indication that these costs will decrease anytime soon. Industry experts predict that the shortage of skilled repair labor will continue, exacerbating the problem. This labor shortage means longer wait times for vehicle repairs, which is inconvenient for members who rely on their vehicles for daily transportation.
This situation creates a vicious cycle: members delay repairs due to high costs and long wait times, which leads to more severe issues and higher repair bills in the future. The financial burden of unexpected vehicle repairs can be overwhelming, particularly for those who are already struggling with their budgets.
For instance, according to our latest claims data, the average claim to repair a transmission is approximately $8,000, while engine repair claims can soar to around $13,000. These figures highlight the financial risks associated with vehicle ownership and the need for protective measures.
The role of vehicle protection plans
Vehicle protection plans and service contracts offer a valuable solution for credit union members facing these challenges. These plans provide coverage for a range of repair costs, helping to mitigate the financial impact drivers face in keeping vehicles in proper operating condition.
Protection plans can cover key areas of the vehicle as well as costs, such as mechanical breakdown protection, GAP, theft deterrent, and ancillary, and can be tailored to cover various aspects, including transmission repairs, engine repairs, towing services, roadside assistance, and even rental car costs while the member’s vehicle is in the shop.
By offering protection plans, credit unions can significantly enhance their member benefits. These plans act as a financial safety net, providing peace of mind to members who might otherwise be unable to afford necessary repairs. Furthermore, these plans also help to protect the overall value of the asset, which is critical as credit unions need to ensure their portfolio health.
It’s never a bad time
Depending on the carrier and the policy, protection plans are available even after loan origination, ensuring ongoing support for members throughout their lifecycle of vehicle ownership. For members who usually trade in their vehicle after the expiration of a manufacturer’s warranty, protection plans can help cover them while they hold on to their current vehicle due to high transaction costs and interest rates.
The critical role of training credit union associates
While partnering with a strong product administrator is a strategic move for credit unions, the success of such partnerships hinges on the ability of credit union associates to effectively communicate the value and benefits of protection products to their members. Proper training is essential to ensure that associates are equipped with the knowledge and skills needed to educate members and address their concerns about affordability, and how these plans can be a valuable investment in the long run.
One of the key components of training is ensuring that credit union associates have a thorough understanding of the products they are offering. This includes understanding the features, benefits, and limitations of each product, as well as how they compare to other products in the market.
Associates should be able to clearly explain how each product can benefit the member and provide real-life examples to illustrate the potential value. The training should also help associates serve the unique needs of each member on a personal level. For example, associates should understand that different protection products serve different types of cars and trucks, such as new, used, or gas versus hybrid/EV.
In addition to product knowledge, credit union associates need to develop effective communication skills. This includes the ability to listen to members’ needs and concerns, ask probing questions to understand their financial situation, and provide clear and concise explanations of the products and their benefits. Associates should also be trained to handle member concerns and address any misconceptions or misunderstandings that members may have about protection products.
Building trust and credibility
Building trust and credibility is essential for credit union associates when discussing protection products with members. Members need to feel confident that the associate is acting in their best interest and providing unbiased information. Training should focus on developing the skills needed to build rapport with members, demonstrate empathy, and establish credibility as a trusted financial advisor.
Training should not be a one-time event but rather an ongoing process. Credit unions should provide regular training sessions and updates to ensure that associates are kept up-to-date on the latest products and market trends. In addition, ongoing support from the auto protection products administrator can help associates stay informed and confident in their ability to educate members about protection products.
Ultimately, credit unions that invest in these initiatives demonstrate their commitment to member well-being, building trust and loyalty that benefit both the members and the institution. As the economic landscape continues to evolve, the importance of added member services will only grow, making it essential for credit unions to stay proactive in meeting the needs of their members, especially in today’s economy when affordability is a constant concern for members.
