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Extended OE Warranty an Attack on the Aftermarket?

The more concerning issue for all of us is that it creates a pattern (or habit) of the vehicle owner returning to the dealership for service for a longer period of time.

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You might not have caught this announcement, and on the surface it seems rather mundane and not really directed at the aftermarket. In fact, most that’s being written about it focuses on its effect on the OE dealers. I, on the other hand, see it as a potential negative for the aftermarket. Here’s what I’m talking about.

Recently, General Motors announced it will be offering an extension on the bumper-to-bumper warranty that comes with new GM vehicles. This will, of course, include Chevrolet, Buick and Cadillac models. On the surface, it just looks like for a fee, new-vehicle purchasers can buy increased time and miles on their bumper-to-bumper, new-car warranty. Here’s a more complete explanation of the action, as reported by Forbes:

“The standard factory bumper-to-bumper limited warranty on Chevrolet and GMC products today is three years or 36,000 miles, whichever comes first. On Buicks and Cadillacs, it’s four years or 50,000 miles, whichever comes first. GM is now allowing customers to literally extend that basic warranty to five years or 60,000 miles (whichever comes first) for Chevrolet and GMC customers, and six years or 70,000 miles for Buick and Cadillac customers for between $1,000 and $2,000 that can get tacked on to financing.”

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No big deal, right? Automobile manufacturers have been playing around with extended warranties as marketing tools for years. Dealers make money selling them, and only a percentage of people buy them. Why? Because over the years, buyers have become leery of extended warranties because they’ve been burned by covered-parts lists or warranty companies going out of business. However, this offering is different.

It’s backed by GM and it’s a bumper-to-bumper warranty. I find this threatening to the aftermarket on two fronts.

First, any vehicle repaired under this warranty will cause the labor revenue and associated parts costs and markups to stay in the OE channel. That means reduced revenues and parts sales for all of us. The more concerning issue for all of us is that it creates a pattern (or habit) of the vehicle owner returning to the dealership for service for a longer period of time.

This might not look like an offensive move to the naked eye, but if you get under the surface and see the real motivation for it, it is. When you couple moves such as this one with the data war that’s going on right now, this is an attack on the aftermarket business model. While we may not be able to control marketing plans by the OEs, we can assist in the fight over data.

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