Automakers are offering a variety of incentives to bring consumers back to the showroom floor and sales numbers, as well as personal testimony, indicate some are starting to work.
Almost all carmakers have seen their sales slump in recent months as consumer confidence has retreated along with the economy. But Hyundai’s U.S. sales were up for the second month in a row in February — by 14.3 per cent compared to a year earlier.
The company has credited a new program that allows consumers to return their vehicles and walk away from their leases if they lose their job or fall ill for a substantial chunk of its sales increase.
Canadian car dealers who also use the program, created by Toronto-based Walkaway Canada Inc., say it has boosted sales during a time when consumer confidence is at a 26-year low and vehicle sales are being hit particularly hard.
Canadian car sales were down 27.7 per cent overall in February.
The program provides insurance through authorized dealers to consumers who are leasing a vehicle.
Leases often pose problems to consumers who find themselves unable to make payments, because vehicles decline in value the moment they’re driven off the lot, while the amount owed by the consumer doesn’t change.
The difference between the value of the car and the amount owed on a lease is called negative equity.
If consumers finds themselves unemployed or too ill to work or drive, Walkaway covers the difference up to $7,500.
“You’ve got more expensive vehicles being financed over longer terms with little to no money down, very low or zero per cent interest rates, so basically what happens is you end up with a consumer owing a lot more than the car is worth anywhere throughout the transaction,” said Robert Varga, president of Walkaway Canada.
Walkaway has been around for 10 years, but it’s really proving its worth now as dealers are using it to overcome “fear and hesitation” on the part of the consumer, Varga said.