Service contract administrators are hard at work on F&I products geared specifically to electric vehicles ahead of a big expansion in the number of EVs on the market.
In some ways, that’s complicated. In other ways, not so much. The relatively easy part is that EV buyers want many of the same F&I products as everyone else, such as coverage for a cracked windshield, lost key fobs, road hazards for tires and interior and exterior appearance.
A central complication is how to address the lithium ion battery — the one thing EV buyers probably are most worried about.
“The battery is always the big talking point when it comes to EVs,” said Jason Garner, senior vice president of strategic product development for AUL Corp.
AUL, in Napa, Calif., offers extended-service contracts on EVs that include limited coverage for the battery and for a home charging station if professionally installed. Garner said sales penetration for EV extended-service contracts was in the low- to mid-30 percent range for new vehicles, or high 40s to low 50s for used — comparable to, or slightly better than, the overall average.
The hard part for extended-service contract providers is that automakers already put extra-long factory warranties on EV batteries as a way to reduce consumer worries and to promote sales. The original equipment warranty on the lithium ion battery in the Nissan Leaf, for instance, is 8 years/100,000 miles, whichever comes first. Basic automaker warranty coverage for the vehicle overall is 3 years/36,000 miles. For the powertrain, it’s 5 years/60,000 miles.
AUL’s current extended-service contract offering covers the EV battery up to 10 years/80,000 miles. Garner said he’s working on coming up with an extended-service contract that would cover EV batteries up to “Any Year, Any Mileage.” Since 1990, that’s been AUL’s tag line for extended-service contracts on internal-combustion-engine vehicles.
Another tactic is to “carve out” the battery, said David Pryor, president of extended-service contract provider Safe-Guard in Atlanta.
“The battery and drivetrain present some unique difficulties,” he said. “It’s either difficult, or expensive, to cover them, or else the OEM has an underlying warranty that runs longer than the typical regular gas-powered vehicle warranty. So basically, to get a favorable price we carve out the battery and the drivetrain.”
In the long run, Pryor said, extended-service contract providers expect EV battery coverage to become more practical and affordable. As consumer confidence in EVs grows, that reduces the need for the extra-long factory warranties, he said. In addition, Pryor and a couple of his competitors said the unit cost of batteries is declining because of new technology and larger volume.
JM&A Group, another major extended-service contract provider, offers EV battery coverage up to 10 years/120,000 miles, said Scott Gunnell, JM&A group vice president of business strategy and operational excellence.
In addition to service contracts, JM&A’s available coverage for EVs includes paintless dent repair, windshield replacement, interior appearance, vehicle theft protection, road hazard for tires, and excess wear and tear for leases, said Gavin Tennant, JM&A vice president of product development.
He said sales penetration is higher than average for EV buyers.
“From a service contract perspective,” Tennant said, “we’re actually selling a little bit more on EVs.”
