Shrinkflation hits the showroom

  11 February 2018 - 8:36am |    Tristan Young

showroom

Where do you stand on warranties? Are they a useful earner for your workshop or can they cause more trouble than they are worth because of exclusions?

Coachworks Consulting, which advises retailers on business strategy, recently pointed out the best route to maximising warranty sales for used cars is to encourage these through the aftersales department, rather than at point of sale.

“Extended warranties are expensive items for used car buyers to purchase because of what they cover, so there can be an understandable level of resistance at the point of sale,” said Coachworks Consulting managing director Karl Davis.

He advises retailers not to risk alienating customers during the sales process but to sell via the aftersales department after the car has been purchased, with the best opportunity to secure the deal being around four to six weeks before existing cover runs out.

Potentially, aftersales will be talking to more Renault owners as the manufacturer recently explained away its decision to reduce its new car warranty from four to three years, saying most change their cars at less than three years. Even so, a long warranty is an attractive selling feature, while a shorter one affects resell values.

So is this yet another example of shrinkflation, meaning less of a product, at an unchanged price? Many don’t notice the shrinkage and for manufacturers, it’s a way of pushing up profits.

Shrinkflation is a favourite tactic with confectionary manufacturers, and with obesity rocketing, this may be no bad thing. But, finding out there is less tuna in a tin or a smaller amount of washing powder leads to ill-feeling. Renault’s actions pale into insignificance compared to VW and dieselgate, but they still suggest a worse deal is on offer.

Renault kept the announcement low key, putting it at the end of a bundle of press information, however, burying bad news can backfire. So time will tell if this is a storm in a teacup. Once the hoo-ha dies down, many will probably forget the warranty was once more generous (at four years and 100,000 miles) and at three years and 60,000 miles, it is still in line with some rival brands. Renault is also offering extended warranty packages costing up to £400.

The change might be a factor for a few savvy buyers, but otherwise it should only prompt retailers to make sure the relevant warranty options are built into their sales and in particular, aftersales processes.

Rachel Gordon

Editor

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