If he were still alive, Woody Guthrie would be a good spokesperson for Hyundai Motor America's new promotional campaign. The Fountain Valley, Calif. automaker is the first to offer an incentive based on anticipation of hardship: The "Hyundai Assurance Program" allows new-vehicle buyers who lose their income within 12 months of purchase to return the leased or financed vehicles.
The company says the program is complimentary for one full year, covers all Hyundai models and is available to everyone.
Joel Ewanick, vp/marketing, says the program was possible because of serendipitous events this fall: Dallas-based Walkaway--which had been doing the business on a retail basis in the U.S.--had gotten certified to run it nationally, while Hyundai had been considering alternatives to incentives to get consumers off the couch.
"I had been moderating focus groups, and it became apparent consumers weren't reacting to traditional incentive programs as they had in the past," he says. "This is a recession of fear; when we realized that--that the number one issue was income and job status--I got on the phone and started calling Mike Buckingham [president and CEO of Hyundai Motor Finance Co.] and asked them to design a finance program that addresses this.
"When I heard that Walkaway was ready to offer their program nationally, we jumped on it, which made us exclusive rights holder." He says the company will offer the program at least through 2009.
Honda started advertising the program with two TV spots last weekend that aired during the NFL playoff games on CBS, Fox and NBC. The ads acknowledge the economy and draw comparisons between the Hyundai warranty and the new Assurance program. In the first spot, over beauty shots of vehicles on mountain roads, a voiceover says: "A decade ago, Hyundai pioneered America's best warranty to show you the faith we have in our cars; today we are introducing Hyundai Assurance to show you the faith we have in you ... an automaker that's got your back; isn't that a nice change?"
The second spot says: "This is a car commercial, but it isn't about cars. It's about the people who buy them. A decade ago Hyundai gave people confidence with America's best warranty. Today we're providing another kind of confidence. We're all in this together, and we'll all get through this together."
The program covers involuntary unemployment, physical disability, medically mandated drivers' license loss, international employment transfer, personal bankruptcy for the self-employed, and accidental death (which should deter people who are willing to kill themselves to get out of a lease).
The company says customers have to have made at least two payments, be current, and pay for any outstanding balance above the $7,500 benefit amount that results from negative equity.
Jesse Toprak, head of automotive industry analysis at Edmunds.com, says consumer credit issues are hurting "bread-and-butter" vehicles. "One reason for decreases for mainstream vehicles like Honda Accord and Toyota Camry is difficulty in obtaining car loans for near-prime consumers," he notes, adding that Hyundai's Assurance program may not garner a lot of takers, but will make the company a standout.
"It's the first such program I've seen, but it's a little difficult to explain to average consumers, so dealers will have to do that, but it's an interesting way for automakers to improve confidence."
Ewanick concedes that communicating the program is the challenge. "It's difficult to do in 30 seconds, so we are driving consumers to the [www.HyundaiAssurance.com]."
He adds that the most frequent questions about the program have been about the how it might affect one's credit rating ("It won't," says Ewanick. "It's really an early payoff of the loan.") and that it's too good to be true. "Its uniqueness is hurting us a little bit," he admits. Toprak says most automakers have not been in a position to offer such programs. "Either they didn't have the funds to lend to people with average credit, or they were required to stop leasing by lenders who don't want to take more risk. Hyundai can probably afford this because they are in better financial shape, and it's likely the cost won't be significant. Any measure that is creative, like this one, will give consumers more reason to go out and shop. It won't be a magic solution, but it will be helpful."
The program is being administered by Walkaway, USA, LL--a wholly owned subsidiary of EFG Companies, a Dallas-based, national performance management company.
Los Angeles-based online shopping and research firm Edmunds.com is predicting that with sales likely to drop by 5% this year, automakers will be forced to be selective in their use of incentives, and hundreds of dealerships will go out of business.