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Why you need to update your used car warranty offering

New-car buyers expect more when they go to the used-car market and a three-month warranty isn’t going to cut it

SMMT new car figures show August sales down 23% year-on-year, in what is typically one of the quietest months of the year. This, coupled with the much-publicised lack of quality used cars, has pushed most motor retailers to broaden the age and mileage profile of their retail stock. It is imperative therefore, that warranties keep pace with customer requirements and expectations.

A recent RAC member survey discovered that 82% of used car purchasers cited warranty and MOT length as being key to their buying decision making. This will be even more heightened in the near- to mid-term whilst the supply of quality used cars remains under pressure. The traditional relatively poor offering of three months used car warranty must now come under review by all motor retailers with a minimum six months becoming an industry norm.

Franchised retailers v independent used

The challenges here are different in terms of used car warranty coverage. Franchise retailers have the advantage of their respective OEM partners used car warranty and maintenance programmes. A current example of this is the VW 2+2+2 initiative, which offers a two-year warranty, two-year roadside recovery and two-year MOT test.

Other OEMs offer similar customer-centric initiatives; however, some offers are limited to customers who purchase by finance, which prejudices cash buyers. Franchise retailers may have difficulty in explaining and justifying this to non-finance purchasers.

Car supermarkets and independent retailers have no OEM backing and as such warranties are supplied at their own cost on a per-unit basis. There is a danger that these warranties are of a lesser cover due to the cost of the warranty insurance policies.

It is a key imperative for independent used car retailers that their warranties are equitable versus franchised retailers as, due to the cost of stock acquisition, the screen price differential advantage is largely eroded.

Transferable manufacturer warranties

In recent years, extended and transferable manufacturer warranties have assisted both franchise and independent retailers alike. A number of the more volume OEMs offer new-car warranties with cover for five to seven-years and up to 100,000 miles, which are transferable as long as vehicle service history has been maintained.

This can be an excellent sales point and also offers a customer centric advantage in a used car offering, the only retailer downside being that it reduces the ability to sell an add-on warranty, but it can assist in closing the overall sale.

EV warranties

It’s reasonably early days as yet but there is a need to include Lithium battery cover in your used car warranty programme. Vehicle manufacturers and warranty providers have been looking at EV warranty challenges for some time as the average lithium battery on a used car can be £8,000 if in need of replacement and much higher for prestige models.

YOUR ACTION PLAN

  • Three-month warranties should be abolished – go for six months minimum
  • Don’t penalise cash customers versus finance ones
  • Ensure warranties have same cover irrespective of age and mileage
  • Don’t go for cheap warranties with poor cover because they offer better PPU
  • Begin to think about EV used car warranties

By Ian Allen