The issue of new car warranties came up again this week. After an ordinary February Holden upped its warranty coverage. The all-new Commodore and still fresh Equinox are now covered by a seven-year warranty and seven years roadside assist. While all 2018 models (Spark, Barina, Astra, Trax, Captiva) get five-year coverage.
Upon reading the opening of Holden’s press release, my initial thought was – brilliant, Holden is serious about selling cars. The thought was fleeting, the move isn’t permanent, it only applies to models purchased by 31 March 2018.
Holden trialled longer warranty coverage towards the end of 2017. I get the impression the promotion wasn’t as successful as the brand would have liked.
Running a longer warranty as a promotion doesn’t inspire the same level of consumer confidence as a permanent move.
Warranty coverage has been a talking point since Kia moved to a seven-year package. Honda played off the front foot last year when it extended its warranty coverage to five years. It’s interesting to note, these two brands are growing fast, however, does the length of warranty make that much difference?
Australia’s biggest-selling brand Toyota continues to stick with three-year coverage. It hasn’t hurt sales. In fact, Toyota has reached a level of popularity on the back of its reputation for reliability and build quality where it could reduce the length of its warranty and not drop a sale.
Mazda sits at number two and backs its cars with the standard three-year, unlimited kilometre warranty.
Manufacturers that have a history filled with reliability issues have often used beefed up warranty coverage to change market perceptions. A recent example of this is Jeep. After a spate of well-publicised reliability problems, Jeep sales in Australia plummeted. To reverse the slide a five-year warranty was introduced. In this instance, Jeep hasn’t seen a bounce in its sales.
A warranty that runs out after three years just doesn’t seem good enough in 2018. I have no reasoning for this statement other than “it’s the vibe.”
Of course, in Australia, there is some loosely enforced consumer guarantees that say all products for sale here should last a reasonable amount of time regardless of what the warranty card states.
All of this leads me to think it’s the product, not the warranty that makes the difference. Kia offers a long warranty which is a sign of the confidence the brand places in its products. But, in all seriousness, Kia makes quality cars, desirable cars. I would argue the brand would be growing at a similar rate if it offered a five-year warranty.
Kia started life as a budget brand, the long warranty was about changing the perceptions of those who may not have owned or considered one before. In this regard, the seven-year deal has done the job. If you look carefully on your next drive, there are plenty of older Kia models still in service, meaning the quality is there.
Quality cars backed by a responsive service network is what establishes buyer confidence. The majority of Australian buyers are fiercely loyal to brands that have looked after them properly. On the other side of the coin, locals will quickly abandon makers that haven't stumped up when assistance has been needed.
The number of years the manufacturer writes on its warranty literature is not as important as the response to a fault or customer concern. The brands who consistently do well understand this. There are plenty of reports of car companies supporting customers when the car in question is well outside the warranty period. There are also plenty of reports that detail the opposite.
What some might not have considered though is that long warranty coverage is more a mechanism for the dealer to increase the profitability of its service department. It’s not necessarily the beacon of quality some believe it to be. A new car warranty is a lot like an insurance policy, you don’t really know if it’s worth the paper it’s written on until there’s a problem.
In the film Tommy Boy, Chris Farley’s character is trying to sell brake pads that do not have a guarantee written on the box, when his competition does. Why would anyone choose the option that didn’t have a guarantee on the box? A completely logical question to ask, how can he genuinely compete if he can’t or won’t do what others will to secure a sale?
After a bit of rambling, he dismisses the guarantee by saying: “They know all they sold ya was a guaranteed piece of shit. That's all it is. Hey, if you want me to take a dump in a box and mark it guaranteed, I will. I got spare time. But for right now, for your sake, for your daughter's sake, ya might wanna think about buying a quality item from me.”
If it was just down to warranty length, Kia would sit at the top of the sales chart, but alas, it’s not. A delicate balance is required to reach the summit, a balance consisting of well thought out models, competitive specifications and a track record of reliability and durability. Wrapping that checklist around a fleet of SUVs and utes is all it takes. Simple.
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