Mechanical Breakdown Insurance Benefits Member and Credit Unions
May 9, 2016
May 9, 2016
By John M. Vincent
Cars have gotten safer, smarter, more connected and more efficient. The average car now contains more than 100 computers, or electronic control units (ECUs) in car-speak. They’ve also gotten more expensive to repair when those advanced systems fail.
Where automotive repair facilities once repaired failed components, now they’re more likely to replace a vehicle’s modules, and those modules can run into the thousands of dollars. A typical transmission replacement will cost from $2,500 to $8,000, depending on the complexity of the design.
But members have a way of avoiding the shocking repair costs, and you can help while earning non-interest income and shielding your credit union from losses along the way.
Dealers typically call them extended warranties, and they make a tremendous markup on selling them to customers that don’t know that similar (if not better) coverage is available from lenders and auto insurance companies. Outside of dealers, the preferred term is “mechanical breakdown coverage” and the products can take care of more than just the vehicle repairs.
“We are providing a mechanical breakdown coverage that will for an additional time period and/or mileage on the car cover common expenses that the member typically is not planning for,” says Dan Gallagher, lending products manager for CUNA Mutual Group. “With the deductible that they chose they can plan for their budget and not have unexpected cost that put them in a position where they potentially have to make painful choices such as paying their loan payment to the credit union for their car, or paying other bills that are due.”
By educating members about the availability of mechanical breakdown insurance, and letting them know the price that they should be paying and the coverages that are available, your credit union can save members hundreds of dollars.
“It aligns with the credit union philosophy, focusing on the members and providing them the best financial products and services that we can,” says Gallagher, “especially knowing that other entities, particularly dealers, are offering it at a higher markup for the same types of benefits.”
CUNA Mutual Group offers additional coverage including roadside assistance, travel expense, and provision of replacement transportation (rental car) at a variety of deductible levels.
If there is a major component failure, such as a $2,000 navigation system, the member won’t be forced to make a decision as to whether to pay for the repair or make their car payment on time, protecting the credit union from a loan loss.
The average age of vehicles on the American road has hit an all-time high, and even new cars that advertise long new-vehicle warranties only cover non-drivetrain components for three years. With many of the manufacturer-provided extended warranties, you’re forced to use their dealers. With CUNA’s products, like many third party mechanical breakdown policies, members can take their cars to any trusted mechanic (including dealers) who will then work with CUNA Mutual Group’s third-party coverage administrator to coordinate repairs.
“From a member’s perspective there are unexpected expenses that go with owning a car,” CUNA Mutual Group’s Gallagher tells your Association. “This coverage allows them to have the security and the comfort of knowing that cost is locked in.”
John M. Vincent is a nationally recognized automotive journalist and a credit union board member. Reach him at JMVincent2848@gmail.com or @OregonsCarGuy on Twitter.