Dealer funded guarantee schemes carry significant financial risk, warns WSG

Dealers are being warned that claims made through self-funded warranties could well exceed the any funds set aside.

WSG reviewed over 50 admin schemes it manages for dealers and found that nearly a quarter (22%) lacked adequate funds to cover claims over a 12-month period based on their average claim rates and amounts – which could mean severe cash flow issues if their self-funded pools are insufficient to cover annual warranty claims.

Some dealers will need to replenish their claim funds within the next year, in some instances by as much as £20,000, to meet obligations.

John Colinswood, CEO of WSG, said that while self-funded schemes appear to offer significant savings on warranty costs, its research indicates that the reality can be quite different.

“The funds we examined include a diverse range of dealers from small independents to multi-site franchises. The findings reveal that many dealers will face considerable shortfalls in their claim funds in the coming months, a problem exacerbated by the increased cost of warranty claims over the last year due to global parts shortages and rising labour rates.

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