Warranties proving key to selling older ex-fleet cars

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Customers seeking reassurance around four year old company cars

Customers are seeking higher levels of warranty cover with the four year old ex-fleet cars that are starting to become prevalent on the used car market, according to RAC Warranty.

As a direct result of the recession during the last 12 months or more, an estimated quarter of companies have opted to extend their leases on existing cars beyond the established industry standard three years/60,000 miles to four years/80,000 miles or even beyond.

However, these cars are now starting to be defleeted and are appearing on dealer forecourts in relatively large numbers – and often at high prices thanks to general stock shortages.

Ian Simpson, sales and marketing director, explained: “The effects of the recession on the leasing and used car sectors have created a market where a customer may find themselves paying a similar price for a four year old, high mileage ex-fleet car today as they would have for a three year old, 60,000 mile one just 12 months ago.

“In this situation, the feedback that we are receiving from dealers is that the warranty offered with the vehicle is becoming an ever more important part of the deal. The higher mileage especially is making customers wary as is the general condition of some of these vehicles.

“Ultimately, customers are still buying but they are seeking a safety net in the shape of a warranty that they trust and which they believe has a high degree of credibility – and dealers are often responding by providing higher cover within the windscreen price.”

Simpson said that feedback from dealers also indicated that customers for cars of this kind were also frequently opting to extend their warranty even further – either improving the level of cover or increasing the length of the warranty.

He said: “This has been a general recessionary trend. In tough economic times, used car customers are looking for the highest degree of reassurance possible that they will be protected from unexpected motoring expenses.

“However, there are areas of the market where the desire for extra cover seems to be stronger than others, and sales of extended warranties have been especially strong around four year old ex-fleet cars.”

Simpson added that it was difficult to predict whether the four year old ex-lease car would replace its three year old predecessor as one of the mainstays of the used vehicle market.

He said: “It is not yet clear whether the companies that extended their leases have regained the appetite for signing new ones, or whether the four year lease has become the industry standard. Whatever happens, the eventual outcome will have a definite impact on the shape of the used car market for some time to come.”

About RAC Warranty

RAC Warranty is a new warranty company operated by the RAC in partnership with The Warranty Group, launched at the start of 2008.

It offers an extensive group of products. There is a range for FSA compliant dealers – Parts and Labour Cover at Silver, Gold and Platinum levels, GAP Loan Shortfall Insurance, GAP Return to Invoice Insurance, Tyre Insurance, MOT failure Insurance and Lost Keys Insurance. Depending on the level of warranty cover there is no exclusion to the age or mileage of the car as long as it meets minimum purchase price requirements.

Additionally, a new product called RAC Service and Maintenance, providing excellent value to consumers but not subject to FSA regulation has been developed which will allow a large number of dealers to add significant benefits to their ongoing customer relationships.


About RAC

With around seven million members, RAC is one of the UK’s most progressive motoring organisations, providing services for both private and business motorists.  Whether it’s roadside assistance, insurance, vehicle inspections and checks, legal services or up-to-the-minute traffic and travel information – RAC is able to meet motorists’ needs.

RAC is committed to providing the very highest levels of service to its members and has been ranked first for customer service by J.D. Power and Associates’ UK Roadside Assistance Study for the last three years and the top named service organisation in the July 2009 UK Customer Satisfaction Index from the Institute of Customer Service.

Aviva bought RAC in May 2005.  The acquisition brings together RAC’s powerful brand and customer base with the expertise and leading position in motor insurance of Aviva UK Insurance (formerly Norwich Union Insurance). Aviva is the UK’s largest insurer with a market share of around 15 per cent.

RAC is part of Aviva, the world’s fifth largest insurance group which operates in 28 countries.

RAC’s news releases and a selection of images are available from the internet press centre at www.racnews.co.uk.

About The Warranty Group

The Warranty Group is the world’s premier provider of extended service plans, with operations in 33 countries and 2,100 employees. By providing underwriting, claims administration, compliance and marketing expertise, The Warranty Group is a single-source solution for manufacturers, distributors and retailers of consumer goods including autos, homes, consumer electronics and appliances.