Hyundai to Guarantee Trade-in Values
By Charles Krome
While there were no doubt plenty of newsworthy vehicle introductions at the recent New York International Auto Show, one of the most important announcements at the event didn’t have anything to do with a specific new car or truck: It was the launch of the latest component of the Hyundai Assurance program, which now guarantees the trade-in value of the automaker’s new vehicles. The move is a key part of Hyundai’s shift away from being a “value brand” that competes primarily on affordability to acting more as a mainstream player that also can attract some premium buyers.
As part of this effort, the trade-in program also effectively replaces the previous Hyundai Assurance campaign, which offered protection to buyers in case of a sudden job loss.
The basics of the new program:
- It covers all Hyundai new-vehicle purchases made after May 1, 2011, ranging from the Accent to the Equus.
- The trade-in value is determined based on a forecast of a vehicle’s future value, as determined by the Automotive Lease Guide (ALG), one of the country’s top providers of information on residual values.
- Trade-ins are limited to vehicles in their third and fourth years of ownerships (24-48 months after purchase).
- At trade-in, consumers can use the higher of either the ALG trade-in value or the actual market value of the vehicle to help pay for a new Hyundai.
It’s another canny move by Hyundai, and worth a quick refresher about the state of the company’s marketing. The original job-protection program is often credited as the brainchild of marketing maven Joel Ewanick, who was unanimously lauded as one of the key architects of Hyundai’s current success. Ewanick has since moved on to General Motors (after a momentary stop with Nissan), and some folks had to be wondering how the loss was going to affect Hyundai. And now we’re starting to see the answer is “it’s not.”
After all, the new trade-in value program targets one of the most important factors in the new-vehicle consideration process—depreciation—but does so in a way that exposes Hyundai to relatively little risk. Remember, the guaranteed value is being set by a third party based on existing market conditions, so Hyundai isn’t really promising to keep the value of its vehicles any higher than it already is (or would be in the future). The risk really only comes into play if for some unexpected reason Hyundai values suddenly fall of a cliff. Yes, that could happen, but it’s not as if Hyundai is guaranteeing a trade-in value that’s supported solely by wishful thinking.
Plus, because the company is keeping everything in house, so to speak, by limiting the guarantee to trade-ins for future Hyundai vehicles, there’s a fair amount of wiggle room involved. The potential cost of a dealer having to throw another discount into the pricing mix to make up for any discrepancy between the promised trade-in value and the market value is certainly lower than if actual money were involved.
Yet the automaker is still able to honestly position the program as a “a direct result of Hyundai’s sensitivity to consumer preferences” that “is made possible by the strength of Hyundai’s residual values, now among the highest in the industry.”
And it’s likely to help sales of at least some Hyundai products to reach the same levels.