Unemployment is now higher in the United States than at any point in the last 16 years, and it's projected to get worse. Everyone is nervous about their job security.
This doesn't seem like the best time to take on either tens of thousands of dollars in new debt or hundreds per month in car payments, does it? But Korean automaker Hyundai is offering one way for car shoppers to minimize the risk.
It's called the Hyundai Assurance Plus program. The idea is simple: If you finance or lease a new Hyundai and happen to lose your income in the first year that you own the car, you can bring it back to the dealership and walk away.
So far, the program has proven to be good for Hyundai. In January, as sales of nearly every major automaker declined 30 percent or more, Hyundai says it saw a 14 percent sales jump.
Given the success it's brought to Hyundai, the biggest surprise about the Assurance program might be that no other automaker has picked it up. However, an individual dealership could. WalkawayUSA, the company that administers the program for Hyundai, says it will work with any auto dealership to put together a similar program. According to Jeff Beaver, senior vice president of Marketing and Product Management for WalkawayUSA, "about two dozen" dealerships currently offer some version of the company's Walkaway program, which has only been in existence in its current form since mid-2008. The company hasn't yet published a list of dealerships that provide the service, partly because business is growing so fast.
Publicity around Hyundai's program has caused many dealerships to contact WalkawayUSA about signing up. "I would suspect that, within a matter of months, there will be hundreds of dealerships" providing the service, Beaver says.
Exclusive to Hyundai, For Now
But will other manufacturers pick it up? "We have been having conversations with other [automakers] for a couple of years," Beaver says, but, "Hyundai really got it. They connected with what the consumer needs in this market and understood what the program was about right away." The Assurance Plus program, then, "is exclusive - we won't offer the same program through another manufacturer in 2009," Beaver says.
We looked at the plan in detail and found there's almost no catch. You don't pay the depreciation. You don't pay a restocking fee. The vehicle doesn't show up on your credit report as a default or repossession - if you follow Hyundai's instructions carefully, it actually appears on your credit report as an early pay-out of the loan or lease. You simply return the car and walk away from the payment.
You can take advantage of the Assurance program if you lose your job, become physically disabled, lose your driver's license for medical reasons, are transferred overseas by your employer, or if you are self-employed and forced to declare bankruptcy. Accidental death is also covered.
Contrary to what you might assume, the program isn't an insurance policy - it's a contract between Hyundai and the buyer. The buyer agrees to lease or finance a new Hyundai. Hyundai agrees to pay off the balance of the loan if the buyer can't. The program doesn't require you to use Hyundai's finance company - Hyundai will provide the same coverage on a loan issued by your bank or credit union.
But if you lose your job, won't you need the car during your job search? That's covered, too. If you lose your income or become physically disabled, Hyundai will make three months' worth of payments on the car.
Too Good to Be True?
There are, of course, a few stipulations to the program. You must make two payments before the coverage can begin, be current on your payments, and be able to document a reason for returning the car that falls under the terms of the program. It also covers only the first $7,500 worth of depreciation. If you take advantage of the 90-day payment pause, the total amount of money Hyundai pays on the loan will count toward that $7,500 cap.
Those last two points should give pause to those considering the most expensive Hyundai vehicles. With the rapid depreciation of big SUVs, for instance, it is possible to see a new Veracruz lose $7,500 of its value in a year - leaving you on the hook for the rest. Likewise, if you bought a nearly $40,000 V8-powered Genesis with little money down, then had to ask Hyundai to make three payments, that could take a big bite out of that $7,500 cap.
But for most of the vehicles in Hyundai's lineup, protection from the first $7,500 worth of depreciation would allow you to return the vehicle and walk away penalty-free.
This may not be the best time to take on a new car payment if you can avoid it; but if you can't, the Assurance Plus program makes a good argument for considering whether a Hyundai could meet your needs.