The decline in new car registrations in recent years continues to feed through into a shortage of used car stock. This has implications for the cost and time of reconditioning these vehicles and building an increasingly consumer-centric landscape for extended warranties.
“The increasing age and mileage of today’s used car parc is a perfect recipe for escalating the number of warranty claims, or Consumer Rights Act/Consumer Credit activity, with the attendant cost and reputational risk.
Combine this reality with the FCA’s forthcoming Consumer Duty, and dealers can help themselves by reviewing their approach to warranties,” reflects Tara Williams, AutoProtect Group’s Chief Revenue Officer.
Having peaked at 2.693M units in 2016, new vehicle registrations have fallen back since, culminating in a near 30% decline in 2020, from where the market has been broadly flat ever since. Those Covid-influenced years, and the well-documented supply issues, have seen around 2.1M vehicles taken out of the UK car parc.
As the pandemic stifled new vehicle sales, used car sales boomed. The net result was a rapid rise in used car values as supply outstripped demand. The average car age in the UK has now reached a record high of 8.7 years, more than a year older than a decade ago. It also means that around 8.4 million cars in the UK are over 13 years old. In this ageing car parc, trade buyers must seek out and purchase ever older stock. It brings with it additional cost and customer care considerations.
More time and money are needed to recondition vehicles, and as the industry knows, consumers are well versed with their statutory rights and consumer rights, which can come into play long after the car has left the forecourt.
This is why warranties can be crucial in providing buyer reassurance, helping to mitigate any post-purchase issues, protecting the dealer’s reputation, and with repair costs rising – their profitability.
However, all warranties are different, and any warranty has to be clearly explained to the customer to ensure they know its scope and their responsibilities in areas such as a correct maintenance regime. For insurance-backed products, this explanation will be a critical part of complying with the FCA’s Consumer Duty regulation. According to the Motor Ombudsman:
51 per cent of UK driving licence holders who would buy an extended warranty for a used car said they would opt to skim-read accompanying terms and conditions rather than reviewing them in full.
Only 57 per cent of those who said they would skim-read the small print said they were aware that a claim might not be successful in relation to wear and tear items or if a car was repaired without authorisation from their chosen warranty provider.
Tara concludes, “The largely unavoidable shift to stocking older used cars carries the inevitable increased risks of breakdowns. Careful consideration of warranty provision and thorough communication of its scope and T&Cs can go a long way to mitigating problems and costs before they arise.”
*Article Source www.rocketperformance.co.uk
