Car dealer warranties win in customer retention battle

Car warranties are 10x more likely than service plans to drive customers back to the dealership, according to new research carried out by Castrol and Trend Tracker.

Of 17,500 new car buyers surveyed, a staggering 68.5% reported that they had returned to the dealership for servicing work due to the manufacturer’s warranty, whilst 12.3% cited expertise and competence as the driving force. Surprisingly, only 6.3% named service plans as the main reason for taking the vehicle back.

Trend Tracker analyst Chris Oakham said: “The report suggests that franchised workshops are in a strong position as new car sales have recovered and continue to rise. With the increased number of newer cars, these workshops can expect to attract a great deal of highly-profitable servicing and maintenance work for those cars still under warranty. Whilst new car buyers are no longer legally tied to a franchised dealership for servicing and repairs, the data highlights the undeniable benefit of a strong car warranty as a key driver behind aftersales retention.”

Nigel Head of Castrol UK added: “The key lies in consistent and targeted communications, high quality parts, extended opening hours, service while you wait, courtesy cars and other value added elements. Experience and expertise is also a major selling-point for customers. Manufacturer-trained technicians, diagnostic updates and recommended equipment are all useful in providing a clear value offer that will encourage many to consider the franchised dealer for their ongoing car service and maintenance needs.”

The findings also showed that franchised dealerships are increasingly relying on their used operations to improve bottom lines, representing 34% of all used cars purchased between 2012 and 2014 – up from just 23% between 2006 and 2008. The full report will be published later this year.

We say:

Whilst the research seems to be focussed mainly around the franchised dealerships offering new vehicles, ensuring that a comprehensive warranty is provided at the point of sale should be a primary consideration for all motor retailers, regardless of their size, shape and stock profile. This includes the franchised dealers with a dedicated own-branded used car section or mixed stock site.

As the report confirms, franchised dealers are turning the attention to their used car operations where vehicles fall outside of the manufacturer’s warranty and / or manufacturer-approved scheme. Vehicles no longer covered by such products immediately expose the dealer’s profit margins to attack and put the customer at risk of spiralling repair bills, which is where aftermarket car warranties can come into their own.

Independent dealerships have been using extended warranties for years to boost their profitability and secure strong relationships with customers, but we expect the stakes to continue rising as the competition intensifies and franchises compete for a larger share of aftersales revenue.

Extended car warranties are the lifeblood of the industry and the only products able to unlock unlimited retention opportunities. In addition to our multi award-winning car dealer warranty products and exceptional service, the WMS Group will help you to develop a robust platform to channel the maximum volume of servicing, MOT and repair work back to the dealership.

Please request a dealer pack or call us on 01844 293810 to find out more.