After a three-month pilot program, F&I product provider EFG Cos. is debuting its first mileage service contract to knit coverage more closely to customers' driving habits.
Complex underwriting strategies delayed the launch of the product, which EFG believes may be the first of its kind.
The product, called the Motorist Assistance Plan vehicle service contract, can shift coverage in 2,500-mile increments on new vehicles or used cars with 150,000 miles or less on the odometer.
Eric Fifield, chief revenue officer at EFG, said the product's features distinguish it from standard mileage terms that consumers typically fall short of or exceed.
"Customers see more value in the product because you tailor it to their exact driving habits," Fifield told Automotive News. "And F&I producers have more confidence that what they're selling matches the customer's driving habits."
Sales of the contract increased product penetration at dealerships in the company's pilot program by 11 percent despite COVID-19 headwinds, Fifield said. Service contract penetration is notoriously difficult for F&I managers to increase. The average penetration rate for franchised dealerships in 2018 was less than 50 percent, according to NADA data.
EFG estimates a service contract penetration increase of 11 percent translates to $200,000 in additional F&I income per year.
The MAP service contract took more than two years to develop. One time-consuming task involved the company using vehicle identification numbers on a variety of makes, models and years and pricing out the coverage on different mileages of those vehicles.
"We have over 16 million terms available," Fifield said. "That's what makes it hard, to be able to underwrite terms with that specific detail."
