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Online sales opportunity

Warranty companies are increasingly turning to internet-based car locators – particularly in the used car market – to promote their products, bypassing dealerships, the traditional route to market.

Their action follows consecutive years of falling warranty penetration, caused by a combination of more manufacturers offering extended three-year policies and dealers setting up their own warranty funds.

But the rapid growth of online retailers, who are appealing to consumers by offering cut-price cars with a one-stop shop proposal of warranty, insurance and finance, has provided warranty companies with a new sales opportunity.

Analysts believe the move may reverse the present trend of declining warranty work in dealer service departments, caused by poor penetration and improved car reliability and they expect dealers, who may lose out on warranty sales commission, to benefit from a boost in work volumes if the policy of selling warranties over the internet succeeds.

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