The offer of used and new car extended warranties counteracts the uncertainty and increasing price sensitivity of end consumers. This was emphasised by 67 percent of dealers in a recent study by puls Marktforschung. At the end of 2024, the institute surveyed around 300 dealers and more than 1,000 end consumers from all purchasing groups in a neutral study on the current situation in car dealerships, customer concerns and approaches to solutions in challenging times.
Customers are concerned about costs and economic development
Factors such as rising prices, inflation, economic developments and international conflicts are unsettling potential car buyers. These concerns are having a significant impact (65 per cent) on customers' purchase plans from a retailer's perspective. Customer loyalty is also declining. 60 per cent of the dealerships surveyed are registering a decline in customer loyalty in the workshop sector - due to the price trend.
Workshop costs have risen significantly
In addition, repair costs have been rising for years. 86 per cent of the car dealerships surveyed by puls stated that workshop costs have risen in the last two years. On average, the costs for comparable service and repair work have risen by 19 per cent. As a result of inflation and wage increases, the hourly rates charged by garages have risen by an average of 16 per cent over the last 24 months for 84 per cent of businesses. The situation is similar for spare parts: 86 per cent of the companies surveyed state that spare parts prices have risen by an average of 16 per cent.
Retail expects further cost increases
According to the automotive experts, this cost increase will continue: 70 per cent of the decision-makers surveyed expect prices for workshop services to rise by a further 11 per cent over the next 24 months.
The figures in the puls study relate to the German market, but the trend towards rising labour and material costs can be seen throughout the European economic area - in some cases with much more drastic increases.
Warranties create trust
The study clearly shows that dealers can counteract the concerns and increasing price sensitivity of end consumers with a warranty offer. This is also confirmed by Konrad Wessner, Managing Director of puls Marktforschung GmbH: "According to our study, 67 per cent of dealers believe that extended warranties help to reduce uncertainty among potential car buyers. In addition, warranties reduce uncertainty when purchasing electric cars (56 per cent) and customers' follow-up expectations (27 per cent). In concrete terms, extended warranties are almost as important in the new car business and even more important in the used car business than discounts. My conclusion: According to our study, warranty offers are developing even more strongly into a confidence and sales turbo in times of rising workshop costs." (Fig. 1)
Last but not least, warranty and repair cost cover is also a tried and tested instrument for increasing customer loyalty to the company. Car buyers particularly value protection against unforeseen repair costs and therefore a feeling of security. The reduction in the risk of follow-up costs after the purchase of a vehicle is honoured by them. This in turn increases the likelihood that the car will be purchased and reduces the expectation of price reductions (Fig. 2).
Dr Marcus Söldner, CEO CG Car-Garantie Versicherungs-AG:
"Rising vehicle costs, economic uncertainty, declining workshop loyalty - warranty or repair cost insurance is an effective way of meeting these challenges, and it also pays off for the dealer. They make it easier to sell vehicles, bind the buyer more closely to the dealership and the workshop and protect the customer from follow-up costs. This makes the purchase decision easier and improves the company's turnover and earnings."
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