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Warranties growth 'great for retailers'

Franchised retailers have increased their share of service work following the introduction of manufacturers' three-year warranties and the boom in new car sales. Sewells' consultant Chris Oakham says dealers' penetration of the mechanical servicing and repair market has risen by several percentage points to more than 40% in the space of three years.

One of the most significant changes is the work now paid for by carmakers. Three times as many cars are now covered by warranty as in 1998 and Oakham believes the bill for warranty repairs, despite improving build quality, has more than doubled in that time to £1bn.

But increasing service business for franchised dealers means less business for the independent workshop sector. “The trade and wholesale parts market will have fallen in real terms because franchised dealers tend to source original equipment parts direct from their car makers,” says Oakham.

“This is in addition to the longer -term decline in the service market because of improving build quality – even though the number of cars on the road continues to increase. It will take some time before the UK aftersales market settles down after three-year warranties, booming new car sales and block exemption.”

Three-year manufacturer warranties began to be adopted in 1998 but it took three to four years before all cars up to three years old became part of the regime. During this period, new car sales picked up substantially and increased the number of cars up to three years old – a double whammy working to the benefit of franchised dealers.

But an investigation into new car warranties by the Office of Fair Trading could lift restrictions on new car servicing being carried out by independents. And automotive analyst Market Facts & Business Information (MFBI) says block exemption changes will lead to more independents competing with franchised dealers as approved garages during the warranty period.

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