Extended warranties can boost residual values

September 30, 2016

Used car buyers are likely to pay more for a car with an extended warranty because it provides them with cost certainty and peace of mind that all or at least most of the potential parts costs are covered should something go wrong. The impact of extended warranties varies according to several conditions including the model and the type of warranty offered. For example, an OEM-based extended warranty is likely to secure a larger increase in residual value (RV) than a manufacturer’s warranty that is provided through a third-party. Analysis in Germany for Autovista Intelligence found that when manufacturers introduced extended warranties, the improvement in RVs could be as high as 6% for an OEM-based offering. In the analysed cases covering all vehicles types, RV improvements from introducing extended warranties have ranged from 2% to 6%. Depending on the model in question, this can reflect an increase in residual value of between €120 and €1,500, depending on segment, when compared to previous models that did not have an extended warranty. One of the key findings was that RV improvements are only achievable if the warranty is transferable to second and third owners.

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March 31, 2017

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