Issue No. 9 | June 2, 2026

For warranty administrators who manage loss ratios, reinsurance, and contract performance.

This Week: What 69-Month Paper Does to Your Reserve Position

THE CURVE: 69 Months

The average used vehicle loan term extended from 64 months in 2018 to 69 months in 2025, according to Experian data cited in Colonnade Advisors’ March 2026 Direct-to-Consumer Vehicle Service Contract Industry Analysis. Five additional months of average loan term means the vehicle is older and higher-mileage before the loan satisfies. It means the borrower reaches higher-frequency repair years while they are still paying. And it means the loss development assumptions built on 2019 deal structures reflect a financing environment that no longer exists.

A consumer on a 69-month note reaches higher-frequency repair years while they still have a year or more of payments remaining. That overlap changes how claims develop across the cohort life. Reserve positions calibrated on older cohort behavior risk carrying a structural severity gap.

THE ADMINISTRATIVE ANGLE

The gap is not only in severity assumptions. It is in the timing of when claims develop relative to the earnings curve.

A DTC contract written on a vehicle financed for 69 months has a different cancellation and claims development profile than one written on shorter-term paper. When a major repair occurs at month 50 on a 69-month note, the consumer faces repair cost, monthly contract payment, and loan payment simultaneously. Many reserve models calibrated on 2019 cohort behavior were not built around that combination.

Repair costs are up 13.9% since August 2022 against 5.6% for general inflation. Technician wages have risen more than 41% since 2001. A DTC book written on 69-month paper and reserved with assumptions calibrated to the 64-month era is exposed to actuarial drift in a cost environment that has moved structurally against it. The revalidation question is not whether the original assumptions were reasonable. It is whether they describe the book you are actually administering today.

FROM THE BLOG

The DTC VSC Market 2026: Why the Fastest-Growing F&I Channel is Just Getting Started

Colonnade’s March 2026 Direct-to-Consumer Vehicle Service Contract Industry Analysis identifies five structural trends driving sustained demand for vehicle protection products: loan term extension, repair cost inflation, an aging vehicle fleet, constrained new vehicle affordability, and dealer remarketing growth. The post breaks down how those trends compound into the operating environment administrators are writing and reserving against today.

THE RESERVE QUESTION

The average used vehicle loan now runs 69 months. At that term, the vehicle enters higher-frequency repair years before the loan satisfies, and the consumer carries simultaneous repair exposure and payment obligation for longer. When were the loss development assumptions in your current cohort reserve model last tested against the actual loan term and vehicle age distribution of your active book?

Until next Tuesday,

If your reserve methodology was built on pre-2022 deal structures and your DTC book has grown since, reply here and we can compare how newer loan-term and vehicle-age assumptions are affecting reserve calibration across DTC portfolios.