“Therefore, clarity of explanation, building value into the product, highlighting the quality of the cover and following a structured sales process that takes into account FCA demands and needs are all essential components to ensure the consumer sees the real benefits of the product.” This wariness does mean some dealers still do not exploit the full potential of the warranty.

Mapfre Warranty head of new business Steve Burgess said: “Many still view offering a warranty on a car as a cost to their business, whereas it should be viewed as a valuable customer retention tool.”

With an increasing number of customers extending beyond three years, Burgess said: “We’re certainly seeing that the average ownership lifecycle of a car is increasing due to financial pressures and the cost of change. In that respect, we’re also seeing that consumers are more focused on protecting themselves against potentially expensive motoring costs, so are very open to considering longer-term warranties.

“Customers are more and more demanding when it comes to big-ticket purchases like cars and they expect even used cars to be presented and prepared to near-new standards. There is an opportunity to even further match the new car experience for used car buyers by providing a longer-term warranty.”  

 

Customers becoming more attuned to extended warranties

Imperial Car Supermarkets, independent car dealers in Southampton, provide warranty products that can cover the finance agreement period for up to five years with unlimited mileage and up to the value of the full purchase price of the car. About 50% of customers upgrade, with the majority opting for the full purchase price warranty.

“It’s worth it for the peace of mind. We offer the extended warranty in every case at the point of handover; it’s an intrinsic part of the sales process. For us, it’s additional revenue but the benefits to the customer outweigh the cost,”  said director Neil Smith.

“We have always viewed our relationship with the customer as one which extends beyond the initial sale and we look to sell that vehicle again when the customer hopefully returns to us to change their car.”

Richard Hodges, marketing manager at Warrantywise, believes extended warranties do not need to keep track alongside longer finance periods. The company is instead experiencing repeat custom on a much larger scale: “We have customers who have been with us for around eight years who renew every year.”