AI-generated image from Midjourney . Voluntary Protection Products Blog.
[This is the 2nd installment in a multi-part series on voluntary protection products. You can see the previous post here]
Voluntary Protection Products
Many car buyers supplement their car purchases with voluntary protection products (VPPs) like maintenance plans, appearance protection, and anti-theft devices. Informed conducted research to see if women and men are paying the same prices for these products.
The study looked at anonymized and de-identified information from more than 340,000 vehicles sold in the first nine months of 2023 which included the purchase of VPPs.
We looked at seven different VPPs:
- Anti-Theft: Typically offers anti-theft devices and benefits if a car is stolen.
- Appearance Plan: Products applied to interior and exterior to protect appearance.
- Key Replacement: Provides free replacement car keys if they are lost or stolen.
- Maintenance Plan: Contract that covers scheduled and expected maintenance.
- Paintless Dent Repair: Removes vehicle dents.
- Tire/Wheel Plan: Repairs road damaged tires.
- Windshield protection: Covers cost to repair damaged windshield.
Our analysis tracked two different metrics – the average price of the VPP and the ratio of the price to the value of the vehicle. We chose the latter metric to account for variations in price due to the cost of the vehicle. After all, you wouldn’t expect the cost of a maintenance plan for a $100k Ferrari and a $35k Toyota to cost the same.
For most VPPS, our analysis did not identify significant pricing disparities between men and women.
As the table below indicates, we observed no statistically significant differences in the prices men and women paid for anti-theft devices, windshield protection, paintless dent repair, and key replacement products. However, the prices men and women paid for appearance plans and tire wheel plans appear to have statistically significant differences. (A p-value of 0.05 or lower is generally considered statistically significant. Meanwhile, a t-statistic is significant if it’s greater than 1.96.)
These differences may reflect varying levels of access, opportunities, or experiences in the lending process. More research needs to be done to determine the specific causes underlying these variations. This research is meant to be informative rather than point to specific causes.
Below, is a table that splits car sales into three buckets – low cost ($25k or less ), mid-range (25k to 50k), and luxury (over 50k).
The table of averages is for illustrative purposes only. Even though the averages vary, they do not rise to the level of statistical significance. We also note that a number of factors contribute to price variations including the model of vehicle, the age of the vehicle, features of the VPP, and duration of the plan.
For the purpose of our statistical tests, we looked at variations in price and the ratio of VPP price to vehicle price. For both variables, to limit the effect of outlying extreme values on the calculation, we create winsorized values where we eliminate the top and bottom 1% of records.
Tom Oscherwitz is Informed’s VP of Legal and Regulatory Advisor. He has over 25 years of experience as a senior government regulator (CFPB, U.S. Senate) and as a fintech legal executive working at the intersection of consumer data, analytics, and regulatory policy.
Husain Yusuf Radiowala is Informed.IQ’s Senior Data Analyst. He is an accomplished analytics professional with 9 years of experience in FinTech, Marketing, Sales and Supply Chain Analytics in which he leverages his expertise in Data to extract meaningful insights from complex financial datasets.