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Older used car warranties are becoming more popular in 2022 in reaction to the cost of living crisis and aging vehicle parcs.
The RAC Dealer Network has reported that the number of written policies covering six, 12, 24, and 36 month periods have all increased with only the shortest coverage available – for three months – seeing sales decline.
Overall, the company’s average warranty period increased from 9.9 months to 11.1 months.
Sean Kent, director of automotive Europe at Assurant, which partners with RAC on the aftermarket, said: “Sales of the longer warranty are being driven by two sources. First, dealers are increasing the standard cover they sell with their used cars. Increasingly, a three-month warranty is no longer seen as sufficient protection to attract and convince customers, with six- and 12-month policies becoming the norm.
“Second, more and more customers are choosing to extend their warranty at an additional cost. This is a result of tightening personal finances and concerns about the impact of unforeseen auto bills, but also because a shortage in new vehicle production means many people today are buying older used cars and realizing the potential for increased damage.
“Really, this is all part of the general trend towards people keeping their cars longer but still wanting some form of ongoing warranty coverage. A recent RAC report on Motoring highlights that fewer motorists are planning to replace their cars with the same regularity as in the past, citing reasons such as rising costs affecting their personal finances and declining incomes during the pandemic.”
RAC Dealer Network, also saw an increase in the frequency of claims in 2022 – up 18% from the previous year – together with a 22% increase in the cost of spare parts.
Kent added: “Once again, we’re looking at the effects of aging used vehicle parcs. Older cars break down more often. Covering it definitely means more claims and that’s reflected in our numbers. It is likely that this will become a trend in the future.
“The substantial increase in parts costs is partly a corollary of the types of claims made – with more failures – and the general increase in parts and labor costs. This is an area where we are introducing new systems to gain more control and we will be releasing more information on these developments soon.
“We are in a situation where there is no end in sight to the aging of vehicles while the cost of living crisis looks set to persist for some time to come. Against such a backdrop, the level of protection and assurance offered by a longer warranty is gaining increasing appeal.”
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