Saturday, January 03, 2009

That New Hyundai Ad is Pretty Clever...

While watching the Colts/Chargers game, I've been struck by the number of ads for the new Hyundai assurance program. It sounds simple enough - if you hit rough times and lose your job, Hyundai will take back the car and you get to walk away.

But as Clark Howard says (btw - look for his show on Headline News - he's great) the trouble is in the mice type (the fine print).

From the Hyundai Assurance brochure -

1) You file a benefit request with Hyundai Assurance.
2) Your benefits specialist will determine the value of your vehicle based on the average of your dealer’s appraisal and the values from leading industry guides.
3) Provided you have made at least two scheduled payments on your loan or lease, you pay for the amount above the Hyundai Assurance benefit (if anything) and any car payments that were due prior to you filing for the benefit.
4) After such payment (if any) and upon benefit approval, you return the vehicle to the selling dealer.
5) You walk away without further financial obligation or negative impact to your credit!

Can you guess the big loopholes in the plan?

1) Your benefits specialist will determine the value of your vehicle - Hyundai has a notoriously bad resale value and despite improvements in their product lines they still suffer huge first year depreciation.

2) You pay the amount above the Hyundai Assurance benefit.

Let's work this on a 2008 Hyundai Sonata GLS for example. This car retails for $21k, but the invoice is $20k so let's assume you pay $20,250 for the car (assuming no $ down or trades). After 4 months you lose your job with XYZ bank and you file for a benefit under the Hyundai program. Well, unfortunately for you, the value of a used 2008 Hyundai Sonata GLS is about $13,000 wholesale (it's not clear what Hyundai uses to determine value - wholesale or retail - but I can't imagine it's retail).

Now you've made about $1,600 in payments on your car, but the Hyundai specialist has determined your benefit to be just $13,000. So, for the low, low price of $5,650 you can now turn the keys back over to your dealer. We take cashier's checks - thank you very much.

Alternatively, you might owe nothing if you made a large down payment. In that scenario, Hyundai just keeps your money and your car. Good for them, not so good for you.

Like most deals, this one sounds better than it appears to be in reality, but I appreciate their creative thinking - it's clever marketing at the very least and many, many, many people will fall for this program.

UPDATE: There is a small note in the Hyundai brochure that I missed initially. They will cover up to $7,500 of negative equity. It's not clear why you'd ever have to pay anything above the the Hyundai benefit if they are covering $7,500, but I still find it interesting that they kept the language in the agreement about a final payment.

So, I'll admit that I missed that number, but I still think this is more marketing than substance. Much like that Jeep ad last summer where you could lock in $2.99/gallon for a year. Well, with gas at $1.50/gallon that deal is a little irrelevant. I expect that this program will be little more than clever marketing at the end of the day.

Cheers!

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