Pegasystems revealed results of a consumer study about extended vehicle warranties that likely reinforce the value proposition finance managers present to their customers, but also probably reiterate store frustrations over sales penetration rates for these products not being higher.
Pegasystems, a software company, said its survey revealed the majority of drivers (63 percent) do not have active extended warranties despite seeing their value. In fact, the survey showed 60 percent of participants agreed that warranties provide value, and 62 percent of consumers with active warranties reported benefitting from them within the past year.
The survey included more than 1,000 U.S.-based consumers with Pegasystems trying to answer a question that’s perplexed F&I professionals for decades. Why are so many consumers driving without extended warranties?
The company explained that its survey results reveal a clear disconnect between appreciating the importance of an extended warranty and actually purchasing one. Results showed the biggest barriers to consumers purchasing a warranty are:
— Cost (35 percent)
— Not thinking they need one (32 percent)
— Lack of availability at the time of purchase (29 percent)
Furthermore, Pegasystems noted that nearly half of those individuals surveyed (48 percent) only somewhat understand their existing manufacturer’s warranty, and 7 percent say they don’t understand it at all.
“It’s imperative that manufacturers and dealers understand these factors to better educate buyers and provide appropriate recommendations on how they can protect their vehicle purchases, as well as what’s included with that protection,” survey orchestrators said.
While it’s important to understand why people do or do not purchase extended warranties, Pegasystems suggested that dealers also should understand who is making these purchases and how they can provide more personalized recommendations.
According to the survey, younger consumers are the primary buyers with 54 percent of 16- to 24-year olds having an extended warranty, while only 25 percent of those 55 and older have an extended warranty.
Survey orchestrators mentioned generational differences also surfaced when respondents were asked how well they understand their existing manufacturer’s warranties.
Nearly 40 percent of 16- to 24-year-olds said very well, while only 22 percent of those participants 65 and older said the same.
“By understanding buyers’ needs on an individual level, manufacturers, their captives and dealers can provide better education on the warranty options that will provide the most benefits,” survey orchestrators said.
Pegasystems emphasized a suggestion perhaps already familiar to dealerships and finance companies — a collaborative approach to creating more loyal customers.
When it comes to loyalty, 54 percent of those surveyed are loyal based on a past experience with a brand, and 47 percent are loyal because of a positive experience with a dealership.
Only 28 percent answered they are loyal because of price or vehicle performance, with Pegasystems noting that the level is revealing just how much rides on the combined experience the manufacturer and dealership provide.
“A strong product combined with a quality in-person dealership experience are almost equally responsible for a customer coming back,” survey orchestrators added.
Pegasystems added that another opportunity for manufacturers, their captives and dealers lies in vehicle-data sharing.
The survey indicated that 54 percent of respondents either agree or strongly agree that they see value in a connected app experience using data from their vehicles to enhance the overall in-vehicle experience. However, many (45 percent) remain concerned about how their data will be exploited.
Combined with product quality, Pegasystems went on to note a key element consumers want in aftermarket experiences — transparency — whether it’s transparency from a dealer on what a warranty covers or how to purchase one, or transparency about how their data is used for better in-vehicle experiences.
“When it comes to aftermarket owner and user experiences, there is an urgency for auto manufacturers, their captive finance divisions and dealer partners to intelligently orchestrate the fragmented channels, processes, decisions and data necessary to cultivate more loyal customers – whether it’s helping consumers with extended warranty purchases or providing more seamlessly-connected ownership and user experiences,” said Steven Silver, vice president and industry market leader or manufacturing at Pegasystems.
“By understanding buyers’ experiences on a deeper level, the industry can provide more personalized recommendations and effortless interactions that protect customers’ automotive purchases long-term, as well as better experiences every time consumers use their vehicles and dealers service them,” Silver added.