Unexpected high costs of vehicle repairs cause “serious financial stress,” for consumers, Mark Manzo, president of Ally Insurance, said in a press release.
Reportedly 51% of consumers said they paid major vehicle repairs in the last five years, according to a survey conducted for Ally Financial by The Harris Poll. Of that percentage, 58% of consumers spent $1,000 or more on vehicle repairs. Meanwhile, 33% of consumers spent $2,000 or more on repairs and 80% paid $500 or more.
What’s notable about Ally’s findings is the rise in total household debt and the number of consumers that cannot pay abrupt expenses out-of-pocket, especially those with “little or no emergency savings,” said Manzo.
Total household debt rose $63 billion to reach $13.21 trillion — and balances increased 0.7% on auto loans, according to the Federal Reserve Bank of New York‘s quarterly report on household debt and credit. In fact, auto is the third-largest category of debt for consumers, at $1.23 trillion.
Additionally, 40% of consumers say they cannot cover a $400 emergency expense or would have to seek financial assistance, according to the Federal Reserve. “Most major vehicle repairs come unexpectedly, and standard insurance policies usually only cover repairs in case of accidents,” Manzo said. “The rise of complex vehicle technology and the increase in the number of used vehicles on the road have only made repairs more expensive and frequent.”
Service contracts, like GAP insurance, could provide customers with, “the security of knowing they don’t have to worry about car repair bills derailing their budgets or putting them in debt,” Manzo added. Although purchasing a service contract or other ancillary product is a cost itself, lenders such as Hyundai Capital America are working to simplify ancillary products. To discover more on ancillary products, check out the August edition of Auto Finance News, out now.
For news on the latest auto finance trends, Royal Media is hosting the Auto Finance Summit at The Wynn, Las Vegas on October 24-26. For more information and to register, click here.
