As automakers and dealers experiment in the subscription space, at least one F&I product company is working to enhance its product lineup for short-term vehicle use.
F&I product provider Assurant is testing a monthly subscription option for vehicle service contracts that allows customers to start and stop coverage at any time.
The option is for the company's redesigned Mechanic 2.0 product, which it revamped in October to expand the term and mileage options. The upgrade is intended to recapture revenue from missed service contract sales, but it also will appeal to customers interested in subscription-based ownership models, according to Assurant executives.
Rather than buying a service contract and putting money toward its cost each month, customers can subscribe to the service contract, paying a monthly fee with the ability to cancel and resume coverage as needed.
Ash Bauer, senior vice president of Assurant Resource Automotive, a subsidiary of Assurant, told Automotive News that younger buyers, particularly millennials, are driving demand for different ownership models.
"The idea of subscription buying is gaining in popularity," Bauer said. "We thought it was perfect timing to create a product specific to our core business that gives the dealer an opportunity for additional income."
The idea for the project came from one of Assurant's largest dealership clients dabbling in the subscription space that wanted to focus on a different way to recapture missed service contract sales, Bauer said.
That customer, a dealership group in the Midwest that Assurant would not name, is piloting Mechanic 2.0's subscription option, alongside a concurrent pilot in the auto finance space with one of Assurant's lender clients.
The Mechanic 2.0 subscription is not sold in an F&I office, Bauer said. The participating dealership group isn't aiming to cannibalize the sales rate of its traditional service contracts. Rather, the group has been pitching the subscription to customers in the service department.
For the pilot in lender services, lenders target customers who have financed their vehicle but chose not to purchase a service contract at the time that they bought the vehicle.
There are four coverage levels planned for the start-and-stop version of Mechanic 2.0, and costs depend on the protection and mileage.
There is no planned nationwide release date for the subscription product within Mechanic 2.0, but Bauer said the company may have enough data from both pilots to make a decision at the end of the first quarter.
