With nearly 30% of trade-ins now carrying an average of $6,884 in negative equity, car buyers are looking for some way to offset higher payments.
A new report by Polly suggests savings found by switching insurance could make up 90% of that negative equity over the life of the loan.
Driving the news: In its Q2 Embedded Auto Insurance Report, Polly reported its average insurance quote had fallen to $157, down from $168 in Q1 and a peak of $202 in Q4 2024.
It reported 71% of its customers saved money, with an annual average of approximately $1,245.
Applied over a 60-month loan term, the savings amount Polly quoted was $6,223, roughly 90% of the $6,884 in negative equity.
“It shows how much additional car someone could buy,” said Christopher Pres, VP of Automotive at Polly.
Zooming in: Insurance rates dropped over the latter half of last year, and for some carriers, rates are down this year.
Pres points out many insurers have caught up to the inflationary cost of replacement and repairs since the pandemic, allowing them to “level off” on rates.
Additionally, he noted, as pointed out in CDG News coverage this week, that the lower costs for EVs and batteries have brought down rates.
But while rates have fallen for six straight quarters, Polly found that in 34 of 36 states with sufficient quote volume since 2021, customers were paying more than 5 years ago.
Pres also noted that some customers were moving to higher deductibles to lower costs.
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Higher F&I: Not only does the Polly report identify savings for car buyers, but it also points out the growth in F&I for dealers offering embedded insurance during the sale.
Dealerships that simply offered embedded insurance saw a $322 increase in F&I.
Dealers that sold an embedded policy saw a $523 lift in F&I.
A Nissan store in the Northeast even reported a $1,391 growth in F&I from selling embedded insurance during transactions.
“When we speak to our dealerships, what we're hearing is that by introducing the concept of insurance, having them think outside of just owning the car and all the things associated with owning a car, it really gets them to open up to make sure that they have the right coverages across the board on their vehicle,” Pres explained.
Bottom line: Along with buying cars, the cost of ownership, including insurance, is an important consideration. Dealers offering an embedded quote can explore savings for the customer and also possibly boost F&I.
“Shoppers are having a moment right now in the industry where they can save money on their insurance by switching carriers,” Pres said. “[Dealers] are finding huge savings for customers that have been with their current carriers for three, five, or 10 years and haven’t shopped it, and now they go to a different carrier that really wants their business, and they’re seeing massive savings.”
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