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Why Are Car Warranty Sales On Fire?

October 6, 2022


What's *driving* growth in car warranties (yes, that pun was absolutely intended!)


I’m not sure I have the answer to this question, but I certainly wonder if it is indirectly related to COVID and the changing auto lending market.


First, consider if marketers were on to something when they flood our phones with calls to sell extended warranties and run television advertisements. Like you, I rolled my eyes when I heard these voicemails and saw the ads. And, over time, these relentless campaigns have become a running joke, primarily due to their frustratingly frequent calls.


However, did these companies foresee something?

As someone who works with auto lenders and their extended warranty programs, I've been astonished at the increase in car warranty sales over the past two years. Historically, increases in warranty sales have been a direct result of higher loan volume, but this time

feels different. I think there's something else going on here.


Considering the scarcity of vehicles leading to price increases and the inflationary impact on auto parts and labor, I believe consumers are: 1) Preparing to drive their vehicles longer than in recent times, and 2) Looking for ways to reduce the expense of aging vehicles.

My hunch is that consumers are putting 2 + 2 together and, in doing so, value the risk transfer that insurance brings to all of us. In this case, it's related to an essential part of our daily lives - cars. While extended warranty programs have become a running joke thanks to recent marketers, consumers are relying on them more than ever because dealing with car repairs in this day and time is no laughing matter."

 

Travis Clayton VP, Financial Institutions Team Lead, R&Y Shareholder tclayton@rossandyerger.com 601-944-0967


Travis Clayton is Vice President and Shareholder at Ross & Yerger and is the Financial Institutions Team Lead. Clayton specializes in Collateral Protection Strategies, Asset & Fee Income Growth Strategies, & Depository Strategies.