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Used car customers look for longer warranties

The knock-on effect from longer new car warranties and improved cover from manufacturer-approved used car programmes is forcing even the smallest used car dealers to consider the subject.

The Warranty Group predicts that the used car market is likely to move towards longer, more comprehensive warranties as a standard part of its offering during the next few years.

Customers are unlikely to consider a typical three months’ free cover as an acceptable part of the deal.

The shift is part of a long-term trend to make the used car buying experience as close to new purchasing as possible, especially for manufacturers and larger independent dealers.

Ian Simpson, sales and marketing director, said: “The continuing shortage of used cars and the resulting increase in prices mean that buyers are, effectively, getting less for more.

"As a result, dealers are having to look at ways of making their used car proposition more attractive and increased warranty provision is one solution.

“Customers have been voluntarily opting for longer and more comprehensive warranties since the start of the recession so building these products into the standard used car offering makes some sense.”

Promotion by carmakers such as Chevrolet, Kia, Hyundai, Toyota and Vauxhall of their market-leading manufacturer-backed warranties is likely to raise expectations of the next generation of used car buyers.

Kia and Hyundai’s warranties are transferable when the car is sold as used and Vauxhall has applied its 100,000-mile cover to the majority of cars in its Network Q approved programme.

Simpson said many franchised and independent dealers measured returns from warranties by the margin they receive from the sale, but a broader measure should include the customer retention opportunity and the potential revenue the workshop earns from that motorist in subsequent years.

“The warranty helps to strengthen the link between the customer and dealer in the medium and long term because they are likely to return to where they bought the car to make any future claims, as well as for servicing and other maintenance.

“Also, the longer the warranty, the greater the potential for workshop profits because claims have a propensity to increase over the life of the vehicle and.

"It is no accident that new and used car dealers who are good at selling warranties also tend to have thriving aftersales operations,” he said.

Dealerships measuring warranty sales to include aftersales returns as well as other customer retention benefits tended to promote them more heavily as a result.

Lawgistics, which provides non insurance-based warranties for dealers to sell, said warranties were extremely useful both for the customer who can have confidence in knowing what will happen in the event of a breakdown and for the retailer who can sell their warranties for a good profit.

“If the motor retailer gives their own warranty it does not need FSA registration and so is relatively uncomplicated.

"Even such an own warranty can have an administration service so the customer and the dealer can be assisted in the event of a claim being made,” added its spokesman.
 

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