Retailers are being urged to promote extended warranties as a way to drive aftersales revenue and improve customer satisfaction in the face of rising repair costs and delayed maintenance.
According to data sourced from the Motor Ombudsman, the Association of British Insurers, and AutoProtect Group, car repair expenses surged by 32% in 2023, and that upward trend is continuing into 2024.
More than half of consumers are postponing essential vehicle repairs to save money, while 75% of vehicle repairers cite rising operational costs as their biggest challenge this year.
AutoProtect said the data highlights an important opportunity for retailers to promote longer-term, high-quality extended warranties.
Joff Suter, sales director at AutoProtect, said that such warranties can help retailers generate aftersales work, mitigate increasing overheads and provide a financial safety net for customers.
The Motor Ombudsman revealed that nearly half of consumers (49%) have been delaying routine but essential vehicle servicing due to high repair costs. Suter believes this demonstrates the appeal of extended warranties, which offer peace of mind by covering expensive mechanical or electrical failures.
Suter is encouraging dealers to reassess their current warranty offerings and to refine their sales and marketing approaches.
According to the Motor Ombudsman, over a third of car buyers expressed a desire for the option to purchase an extended warranty from their dealer. While this presents an immediate revenue opportunity, Suter stressed that the broader benefit lies in increasing customer lifetime value and supporting ongoing aftersales.
The success of extended warranties does however also depend on clear communication with customers.
AutoProtect’s analysis of rejected warranty claims found that one in three claims is not approved, often because they involve wear-and-tear items such as tyres, bulbs, and batteries.
These items are typically not covered by most warranties, though AutoProtect’s premium extended warranty includes coverage for some of these consumables.
“Extended warranties can be a powerful tool for driving aftersales activity and improving customer satisfaction,” said Suter. “It’s about providing the right products and making sure customers are fully informed about what is covered. When customers understand their warranty, it builds trust and ensures they get the experience they expect.”
By offering extended warranties and educating customers about their benefits and limitations, Suter said dealers can create a stronger relationship with their customers, leading to greater satisfaction and long-term loyalty.
