Colonnade Provides Insight Into The VSC Industry

By: Jeff Hatch

January 23, 2019

A new report from Colonnade Advisors details the significant interest among investors and consolidators in the vehicle service contract industry. The following is an excerpt from the appendix of the whitepaper, which provides an in-depth look at the trends and growth drivers behind this expanding market. 

Strong Macro Trends are Driving Acquisitions and Investments in the VSC Industry 

U.S. consumers spent an estimated $35 billion on VSCs in 2018. VSCs are typically marketed at three points in the life cycle of an automobile:

(i) at original sale (the new vehicle segment – extended warranties),
(ii) near or after expiration of factory warranty primarily via direct-to-consumer sales (the end-of-warranty segment) and
(iii) at resale (the used vehicle segment).

The VSC market benefits from high new and used car sales and increasing penetration rates. Consumers value VSCs as they have limited funds to pay for repair bills and they are owning vehicles longer. Dealerships focus on VSC sales to enhance margins. F&I products provide increasing incremental profitability and represent 25% of total dealership gross profit, compared to 15% in 2009. We expect these dynamics to continue.

The VSC market size has grown by 6.9% to $35 billion since Colonnade’s last whitepaper in August 2017. The growth is attributed to three trends:

1) the increase in attachment rates on new vehicle sales,
2) the increase in used car sales and
3) the increase in vehicles out of the OEM warranty period.

Retail Market for VSCs in 2018 Compared to 2017

New car sales ultimately drive sales in the VSC market. New car sales were 17.3 million units in 2018, a slight increase from 2017. However, VSC attachment rates, or the percent of new vehicles sold with a VSC, have increased significantly in the last year causing the new vehicle VSC market size to increase by 5.9% to $16.2 billion.

Used vehicle sales are at an all-time high level and are driving the purchase of VSCs. Older vehicles have typically outlived OEM warranties and have higher maintenance needs, factors that have a positive impact on consumer demand for VSCs. There has been an influx of late-model off-lease vehicles returning to dealers which are older, higher mileage and outside of the manufacturer’s warranty, thereby increasing the need for VSCs on used vehicle sales. Colonnade estimates that 42% of used vehicle sales through franchise dealerships and 20% of used vehicle sales through independent dealerships have a VSC attached. The estimated franchise attachment rate increased from prior Colonnade analyses based on surveys completed by Baker Tilly and NIADA.

The number of vehicles post-OEM warranty has increased to an estimated 87 million vehicles from 86 million in 2017. These vehicles were post OEM warranty and less than twelve years in service, the “sweet spot” for aftermarket VSCs. Year 2017 represents the fewest vehicles in the sweet spot in the last seven years, as a result of the low number of new vehicle sales during the recession. Our research indicates that longer vehicle life coupled with continued high levels of new car sales post-recession will generate a continued growing market for post-OEM sales of VSCs.

Increasing Number of Vehicles Off OEM Warranty

Of the 276 million vehicles on the road, 48% are eligible for a VSC. This group includes new vehicle sales, used vehicle sales and post-OEM warranty vehicles that are less than twelve years old.

Increasing Consumer Demand for VSCs 

Consumer demand for VSCs is increasing as the vehicles on the road are older and higher mileage vehicles have heightened maintenance needs. U.S. consumers are holding on to their cars for longer than ever, partially due to the higher quality of vehicles.

The average age of passenger vehicles on the road was 11.7 years at the end of 2017, up from 9.6 years in 2002. One of the reasons for the increase was the 40% drop in new vehicle sales in 2008 and 2009. The record number of new vehicles purchased in 2015 and 2016 will slow the rate of increase, resulting in an average estimated age of 11.8 years in 2020, according to IHS Automotive.

Length of Ownership

Vehicle owners are increasing their length of ownership. New vehicle buyers now own their vehicle for 6.6 years compared to an average of 4.3 years in 2006, according to IHS Automotive. Used vehicle buyers now own their vehicles for 5.5 years compared to an average of 3.3 years in 2006. This trend is due to longer loan terms and the higher quality of vehicles. By using longer-term loans, consumers can reduce monthly payments and afford more expensive vehicles. Over 85% of new vehicle and 53% of used vehicle purchases are financed, and six to ten-year loans are becoming more popular. As a result of the extended terms, borrowers are not in a net equity position until their fourth year and frequently beyond the manufacturer's warranty. To increase a borrower's ability to pay on loans, lenders include the value of F&I products in loan-to-value calculations as a borrower is more likely to stay current on a functioning car. These trends create the opportunity for higher VSC penetration.

The increasing number of older cars is creating more vehicles that need repairs and maintenance; repairs generally become more expensive as vehicles age. Many consumers are unable to afford repairs as the growth in costs is outpacing wage growth and 40% of Americans do not have $400 in emergency funds. These trends are driving demand for VSCs.

F&I Focus at Dealerships 

Despite improved auto sales, dealership margins remain under pressure, and F&I products provide meaningful incremental profitability. Dealerships have become more dependent on F&I products, as they represent 25% of total dealership gross profit compared to 15% in 2009. This trend will continue as dealership margins on vehicle sales may be squeezed in coming years. In addition to increasing vehicle sales margins, F&I products improve long-term profitability by enhancing customer loyalty and retention by setting the stage for repairs, routine servicing sales and subsequent car purchases at the dealership.

Growth in the number of older vehicles is a positive trend for aftermarket repairs. However, dealerships will face strong competition for these increased repair revenues. Longer periods of ownership take consumers farther away from the selling dealership service lane to less expensive non-dealership repair facilities. Dealers seek to counter this trend by selling VSCs and prepaid maintenance plans to increase the likelihood of drivers returning to the dealerships.


Click on the following link to read this report in its entirety: https://coladv.com/wp-content/uploads/VSC-White-Paper-January-2019-Final.pdf

Filed Under: Colonnade, contract, industry, market, service, vehicle

The Warrantech Consumer Product Group – Your Perfect Partner

By: Jeff Hatch

January 08, 2019

At Warrantech, we look at each service assignment as a unique opportunity that requires an equally unique ability to provide the ideal solution for each client. That’s why Warrantech’s Consumer Products Group is always the perfect partner.
 
Raising Industry Standards Through Better Products And Services
Warrantech’s Consumer Products Group arranges for the underwriting and provides administration of extended service plans (ESPs) on a variety of consumer products, such as:

• Appliances
• Consumer electronics
• Lawn and garden equipment
• Fitness equipment
• Power tools
• Computers, peripherals and accessories
• Jewelry
• Optics and eyewear
• Furniture

Sold through retailers, manufacturers and distributors, these customizable plans address the unique preferences and needs of the individual client. Our ESPs offer the highest level of product protection – beyond the original OEM warranty: replacement, repair and accidental damage from handling (ADH) plans, custom plans, and turnkey plans like our product RepairMaster; Warrantech has a program that will work for you.

We offer comprehensive features that our retailers’ customers are looking for, like:

• Multiple coverage levels
• Upgrades like ADH and express service
• 24/7/365 customer support
• No lemon guarantee
• 100% parts & labor
• No out-of-pocket expenses or deductibles
• Transferable and renewable plans
 
Working For You 24/7
Service after the sale is where our value is most evident – our service doesn’t end once we develop your warranty program. Our service is defined by account management and our call center administration. From our accessible customer service representatives to customized marketing materials and engaging sales training, we know you will see the benefit in Warrantech’s complete customer service offerings.


Want to know more about our consumer product plans? Visit warrantech.com, call 800.833.8801 or send us an email at info@warrantech.com. We’re happy to help!

Filed Under: consumer, plans, products, RepairMaster, service, Warrantech

Products, People, Process – The Methodology Behind Warrantech’s Business Partnerships

By: Jeff Hatch

October 29, 2018

Warrantech believes strongly in working closely with our partners to design a customized solution that works specifically for the needs of your customers. With an unwavering focus on your company’s success, we go out of our way to deliver service excellence in all that we do. The combination of our products, people, and process allows us to assist you in achieving your goals, and makes for a perfect fit for both your program and your partnership with us.

Products
We offer a wide range of products and solutions – everything from automotive, consumer products, specialty risk and administrative services. Tailored to your individual requirements, our comprehensive suite of business tools can be included as a full-scale package or individually as a turnkey solution. Our flexible client-centric programs also allow for scalability and can be quickly updated to adapt to your company’s ever-changing needs.  

People
Warrantech’s staff is second to none. We have all of the resources needed for an effective launch – from program design and creation to training and sales assistance. And we can provide the additional support needed to make sure that your launch is a success, no matter what unforeseen obstacles or roadblocks present themselves.

Our staff has successfully launched several programs just within the last few years and we are prepared for the challenges and workload that each one presents. We will work closely with your team to ensure timely delivery as well as provide our expertise to help guide your decisions to success.

Process
A systematic approach to success is Warrantech’s guiding principal. Our dedicated implementation team works with both your staff and our internal staff to see to it that all tasks are completed in a timely manner. They will coordinate all activities from accounting to legal, compliance to sales, keeping all departments on pace and working smoothly.

The combination of these three core focal points, along with Warrantech’s extensive strength and experience, will ensure the success of your program – not only at launch, but for the long run of your business.

Have questions about our plans and programs? Don’t hesitate to contact us. Visit warrantech.com, call 800.833.8801 or send us an email at info@warrantech.com. We’re happy to help!

Filed Under: administration, methodology, people, process, products, programs, service, solutions, staff, Warrantech

Tips To Avoid Issues With Your Vehicle Service Contract

By: Jeff Hatch

September 25, 2018

A vehicle service contract (VSC) is a smart choice for customers interested in protecting themselves from the high costs of vehicle repair. You just need to make sure you know what you’re getting and what to expect in the event that the unexpected happens. Prior to purchasing or filing a claim, here are a few things to consider to ensure that there are no surprises down the road.

  • Make Sure You Aren’t Currently Under Warranty – Check to see whether the coverage of your service contract overlaps with a manufacturer’s warranty. A vehicle service contract might not be right for you if you are already covered. However, if your warranty is about to expire or you are looking for supplemental coverage then purchasing a VSC makes a lot of sense.  

  • Know What Your Vehicle Service Contract Covers – Not all vehicle service contracts cover all repairs. Take time to read the inclusions and exclusions to be sure that you’re getting the coverage you want and know when coverage might be denied. For instance, if a contract states that only mechanical breakdowns will be covered, problems caused by normal wear and tear might be excluded.

  • Be Aware Of The Length Of Your Coverage – It happens to the best of us. You think you’re covered, only to find out that your plan has already expired. Make sure your coverage is up to date. And if the service contract lasts longer than you expect to own the car, find out if it can be transferred when you sell the vehicle.

  • Perform Regularly Scheduled Maintenance – Under the contract, you may have to follow all recommendations for routine maintenance, such as oil and spark plug changes. Failure to do so could void the contract. Find out if the contract prohibits you from performing routine maintenance yourself or from taking the car to an independent dealer for work. Also, be aware that unapproved modifications or installing wrong parts could void your service contract as well.

  • Keep All Service Records And Receipts – Create a file to keep track of all the repairs that were performed on your vehicle and be sure to include all receipts. This will come in handy if you ever have to put your vehicle service contract to use. Your claim could be denied if you are unable to show that the vehicle was properly maintained.

Have questions about one of our vehicle service contracts? Don’t hesitate to contact us. Visit warrantech.com, call 800.833.8801 or send us an email at info@warrantech.com. We’re happy to help!

Filed Under: contract, coverage, maintenance, repair, service, vehicle, Warrantech

Warrantech Is Proud To Partner With American Residential Warranty

By: Jeff Hatch

August 31, 2018

Warrantech is now partnering with American Residential Warranty to administer our home warranty program in markets across the country and looking for quality service professionals. We offer a connection to an extensive, nationwide network of customers and clients as well as the benefits listed below:

  • Gain an additional business/customer base with no marketing costs

  • Consistent volume of work even in slower seasons

  • Maximize technician schedules

  • Use of ServicePower platform for easy, convenient transactions

  • Customize your ServicePower profile to get the work you want, where you want it

  • Consistent weekly payments including direct deposit within 10 days of invoice submission

American Residential Warranty Named Best-in-Class As It Receives The Only 5 Star Rating For Home Warranty Companies:

https://www.prweb.com/releases/2018/06/prweb15535614.htm


Service Provider Requirements

  • 2M Liability Insurance Coverage

  • Workers Compensation Insurance

  • General Liability Insurance

  • Comprehensive Automobile Liability Insurance

  • Background Screening Certification

  • Completed Application

  • W9

Contact us today by clicking the link below and filling out an online application:

Warrantech Service Network 
 New Service Providers 

A member of our service network team will contact you shortly after, usually within 2-3 business days, to notify you of your status.

You may also talk to our service network department directly at 817-785-6177 or contact us online for more information. 

If you are already a valued member of the Warrantech team, feel free to contact us to ensure that we have the most accurate information in your profile.

We look forward to working with you!

Filed Under: American, Residential, service, Warrantech, Warranty

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