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Used car warranties to make a comeback

Used car warranties will see a resurgence as people seek greater peace of mind by guarding against unexpected aftersales bills, according to Car Care Plan.

Dealers also need ways to improve aftersales retention as their new car margins are further eroded.

The company has seen its warranty business diluted by its insurance products like GAP which now accounts for 15% of revenue. But it believes the credit crunch and economic recession mean that the greater potential for growth is
now its warranty business, which contributes 70% of
its revenue.

“There has never been a more opportune time for dealers to focus on customer satisfaction and retention,” said Car Care Plan managing director Paul Newton.

“We’ve seen tremendous growth in GAP due to the profit opportunities it offers dealers but warranties will always be a core business because of the customer satisfaction and the repeat business it offers dealers.

“Enlightened dealers see warranties as a way to get customers back into the showroom.”

With the core of CCP’s warranty business in the three to eight-year-old car market, Newton believes dealers have an opportunity to increase their involvement in the five year-plus used car market. 

“Customers still want to buy older cars from dealers as long as they are afford-able. But dealers have to recognise the opportunities in these cars,” he said. 

In the face of the growing problems facing Car Care Plan’s owners, finance giant GMAC and venture capitalist Cerberus, Newton reassured dealers and manufacturers about its stability.

“We are insulated against the problems in America,” he said. “FSA obligation is for us to be financially free-standing. We don’t need any additional money from them.”

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