Sean Kent, sales director at the RAC Dealer Network, which partners with Assurant in the warranties and aftersales sector, answers 5 questions of what’s in store for automotive warranties in 2019.
1. Sales of extended warranties have to compete for time in the showroom with other upsells including paint protection and GAP insurance – and time is limited. What can dealers do to ensure they promote warranties effectively and ultimately maximise sales?
It is worth underlining, first of all, that of the value-added products and services commonly sold by dealers, warranties are the most important, simply because they help you to build a long-term relationship with the customer and offer an important revenue stream. Therefore, they should be given a primary position within the sales process.
In terms of structuring the process itself, it is a question of communicating the advantages and benefits of a product to the customer as clearly as possible. There is no magic bullet. It is all about getting the basics right. We spend a lot of time with our dealers providing training, advice and marketing materials that help them to achieve this.
2. In a booming used car market are you seeing a trend for more long-term, higher-quality warranties being sold at dealerships? If yes, can you provide details?
There has been an ongoing trend in the market towards longer term and more comprehensive warranties for many years. Really, this is part of a move towards dealers creating increasingly comprehensive propositions that move ever closer to new car-style levels of protection.
To meet this demand, we have recently introduced a product at the top of our range called Platinum Plus. Available on vehicles up to six years old with fewer than 60,000 miles on the clock, it extends cover to include claims from £500 to the vehicle’s value, failures caused by carbon build up, wear and tear, and diagnostic work up to one hour. This is already finding a ready market.
3. Given wider economic uncertainties (Brexit, diesel residuals etc) are customers seeking more robust extra elements in their warranty packages compared to 12 or 24 months ago?
The key trend here, which has been underway for some time but has probably been accelerated by the current economic conditions, is for dealers to provide a more comprehensive customer proposition and we are seeing a marked move towards longer warranties provided as standard. For example, over the last 12 months, we have seen a 10% drop in sales of three month warranties and a corresponding 10% increase in six months. We believe longer standard warranties will be an important part of the market during 2019.
In terms of customers choosing to upgrade to longer and more comprehensive warranties, there is a recognised correlation in our sector between this happening and car buyers feeling as though their personal finances are perhaps less secure. We provide a solution at times such as this for people who want to minimise the chances of unplanned motoring expenses.
4. Without giving away all your selling secrets can you share any best practice warranty selling tips or ideas that have worked well for your best dealer customers?
Something that does have a direct impact is where an interest-free option is introduced for customers. We are currently offering this option which gives buyers the opportunity to pay for their RAC warranty over 10 months of equal payments via direct debit.
This is all about increasing the affordability of our products for used car customers, especially at a time when we are seeing an increasing appetite for longer and more comprehensive warranties. Where this kind of offer has been made previously, we have found that it has allowed more buyers to access the level of cover that they desire.
5. How significant do you see warranty sales in a dealership’s bottom line profitability, or per car sale (in percentage terms)? What sort of figures do your best dealers achieve with your warranty products?
The figures vary widely depending on the individual dealer but what we can say is that with used car stock values currently remaining very buoyant and margins on vehicles themselves being reduced as a result, the additional revenue stream that a successful warranty programme provides is of increasing importance to many dealers. This is something that is true across the market and is likely to remain so for the whole of 2019. We are certainly seeing many dealers reviewing their warranty programmes and some moving over to us as a result of this trend.
For more information about how Assurant can support your dealership and your customers, such as with RAC Warranty, please visit here.