Hyundai's Trade-In Assurance: Let the Driver Beware

Into a U.S. car market rife with uncertainty these days, Hyundai has thrown yet another new twist: The fast-rising Korean brand will guarantee customers a future trade-in value for a vehicle at the time of purchase.

Operating under Hyundai’s “Assurance” marketing banner, the new program appears to be a clever way for the brand to continue to reach out to American consumers with promotional innovations that that take some of the risks out of buying a car. Hyundai’s original (and just scrapped) Assurance program protected purchasers against loan or lease payments in the event they lost their jobs.

The program will launch at Hyundai’s 800 U.S. dealerships on May 1 and guarantee trade-in values for two to four years. It covers only vehicles whose market trade-in value drops below the guaranteed price. And to qualify, customers have to show proof that they’ve kept up with factory-recommended routine maintenance at Hyundai dealers.

The move could be a smart one for Hyundai for a number of reasons. First, it is yet another way for Hyundai to accelerate its rise to first-tier status in the U.S. auto market that began with its 100,000-mile warranty several years ago — an industry first — and continued with the original Assurance program, as well as more and better vehicle models.

Second, it isn’t likely to cost Hyundai very much. Just as only a relative handful of Americans actually cashed in on the Assurance job-loss guarantee, few Hyundai purchasers are likely to have to take advantage of the trade-in pledge. That’s because the prices of late-model used cars have surged lately, and are likely to continue to do so, because of rising gasoline prices.

Third, it’s a way for Hyundai to get some promotional mileage without having to offer traditional cash or low-interest-rate incentives. Hyundai’s production for the U.S. market already is pretty much maxed out, and the tightening supplies of inventories of Japanese-brand models – made so by the earthquake aftermath – already might boost American consumer interest in Hyundai beyond what the company can satisfy.

Fourth, the service-certification requirement is a good way for Hyundai to increase traffic at its dealerships and improve service retention, an area where Hyundai significantly trails top-flight competitors.

So it's all good as far as Hyundai's concerned. But what about drivers? The Consumerist blog warns of the caveats, and adds that the requirement to use a Hyundai dealership for repairs makes the program more expensive.