New cars: Longer warranties - good or bad?, AM | Page 2

New cars: Longer warranties - good or bad?

04/05/2012 in News, Market Insight

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“While our lost revenue from warranty work is substantial to say the least, although thankfully nowhere near critical, we believe that loss will eventually be replaced with increased revenue delivered by such packages.

"We will just have to grin and bear it for the time being,” said Lifestyle Europe’s managing director Peter Isted, whose group represents franchises such as Renault, Mazda and Ford.

Year-to-date warranty labour sales in Lifestyle Europe’s workshops are down 25%, but that’s against a general labour sales downturn of 8%.

This decline in warranty work is a direct reflection of the increase in product quality, particularly for the likes of Renault which Isted welcomes along with moves by the manufacturer to introduce schemes to encourage customers to keep returning to their local franchised dealer.

Renault’s 4+ package offers four years’ servicing (up to 48,000 miles), four years’ roadside assistance, a four-year finance deal and a four-year warranty as part of the same bundle as standard on new cars and Isted is eager to hear what Ford is likely to lay on the table.

He said: “In these tough times any loss of revenue is regrettable, but this has to be balanced with the fact that the reduction in warranty work is a direct result of product improvements which will inevitably attract more customers to the brand.

"The way we retail vehicles is changing at a rapid pace with a whole host of factors in the mix from the very obvious impact of the internet and social media to these more subtle influences.

"Already, we are seeing manufacturers such as Renault take this on board by introducing a much wider package over a longer period of time.

“At first sight, the obvious answer would have been for manufacturers to extend the warranty to cover more components, but while this would effectively replace our loss of revenue in a much shorter space of time as well as providing us with an additional sales tool, I think it could be detrimental for any brand in the long run.

"All-encompassing schemes which cover pretty much everything apart from insurance and fuel are definitely the way forward.”

All-encompassing packages ‘will influence fleet choices’

Isted also believes that it’s exactly these kinds of packages that will influence fleet choices as well as the buying patterns of the private motorist, although wholelife costs will make the decision-making process for fleets far more complex.



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Comments (2)

racer47 - 142 weeks ago

Very niaive I'd have said. All franchised networks are doing their damndest to get customers through the door. You can argue about customer loyalty but given that 50% of new vehicles are fleet, and the fleet companies are using independants and fast fit to try and chip the maintenance budget down how do you stop that? The only answer is a valued no brainer of a service package i.e. like the BMW/Mini TLC package which is far cheaper than the actual servicing would cost - so even the fleet companies buy it, in addition the Service History adds to the residual value. There are too many companies trying to sell service plans which are at full up cost and dependant on your mileage won't cover the service cost when its due. If the franchised networks want to survive they MUST have vehicles that are sold with a long warranty, and servicing included in the price of the vehicle (a la Renault) and NOT a bolt on! I'd have thought the ideal would be 5 years warranty/roadside and servicing, this also ensures the second or third owner (who's probably never used a main dealer - he just assumes the £4m gin palace down the road is expensive) will use the main dealer. Its not difficult is it??

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gezza37 - 142 weeks ago

A bit naive of Robert Lujan to say Nissan haven't lost sales due to longer warranties elsewhere. I can assure him they have as I know people who have bought Kias and Hyundais just because of the warranty and the ability to sell the car in three years with at least 2 years of manufacturer warranty remaining.Why would you buy a car with a 3 year warranty when you can get one with 5 or 7 years?

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