Hyundai to Guarantee Trade-in Value of New Cars

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By Dee-Ann Durbin, AP Auto Writer

NEW YORK (AP) — Hyundai Motor Co. said Wednesday that it will guarantee the trade-in price of new cars sold in the U.S. starting May 1.

Analysts said it's the first time an auto company has made such a guarantee. While the program probably won't cost Hyundai much, it will likely increase the number of return customers to the brand, since buyers can only apply the trade-in value to a new Hyundai.

The company will guarantee the value of a car that's traded in after two, three or four years.

The offer is the most recent in a series of innovative marketing programs from the automaker, which surprised the industry in 1999 with a 10-year, 100,000-mile warranty. The company recently ended a program that promised to buy back buyers' cars if they lost their jobs. It was called the Hyundai Assurance Program.

"It's a bold move for Hyundai. Like the assurance plan, it's a minimal cost to them, but it creates a lot of buzz," said Jesse Toprak, vice president of industry trends and analysis at TrueCar.com.

If the assessed value of that car is higher than Hyundai's guaranteed price, the buyer will get to apply the higher value to a new car. If the assessed value is lower, the buyer will be able to apply the Hyundai price.

Toprak said the program is likely to be a wash for the company, since in some years the guaranteed trade-in value will be more than the assessed value and in some years it will be less. Even if Hyundai's price is lower than what the owner could get on the open market, some people will opt for the program because it eliminates the hassle of selling a car, Toprak said.

It's also a good time for Hyundai to introduce the program because used-car prices are rising. The company will be less likely to lose money when it resells cars turned in by customers.

The program is unique. Subaru also guarantees a minimum trade-in value for owners, but the company doesn't guarantee the price when the car is sold. Instead, it updates the minimum value monthly and tells owners the price when they're ready to trade. Car-selling site AutoTrader.com also has a program that lets owners set a trade-in price online, but it's only honored at participating dealerships.

Hyundai Motor America CEO John Krafcik, who announced the program at the New York Auto Show, said Hyundai came up with the idea about five months ago, when it was thinking about ending the job assurance program.

Krafcik said the program will help eliminate buyers' worries about the falling value of their new cars.

The program should help Hyundai's loyalty rates, which measure how often customers buy the same brand they're trading in. Hyundai and Ford Motor Co. saw the biggest jumps in U.S. rates last year, according to Experian Automotive.

Around 45% of Hyundai customers now buy a new Hyundai, Experian said. That rate places it fourth in the U.S. industry behind General Motors Co., Ford and Toyota Motor Corp.

Hyundai's U.S. sales are booming thanks to new products like the Sonata and Elantra sedans. Sales rose 28% in the first quarter of this year compared with the same period last year.

-- Associated Press Writer George M. Walsh contributed to this report from Albany, N.Y.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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