Glass’s comments on impact of extended warranties on RVs
The firm said that research conducted by its European parent EurotaxGlass’s in the German market showed that residual values for otherwise identical 36-month-old models improved by between 1-3% with an extended warranty bundle.
This was on the basis that extended warranties, such as the seven-year one offered by Kia, offered a truly incremental benefit (such as seven years rather than three) and were well understood by the buying public.
Dr Richard Parkin, director of valuations & analysis at Glass’s, said: ‘In many ways, this should not come as any surprise as mechanical repair expenses are taken out of any estimates of future cost of ownership, making the vehicle more appealing for the used buyer. As a consequence, it does appear that consumers are willing to pay more for a used car with part of a seven-year warranty remaining over one without.
‘Furthermore, in the UK, the residual value difference in percentage terms between a 2007 Kia Cerato and a 2007 Kia Cee’d is 3% in favour of the Cee’d. Neither of those we’re sold with a seven-year warranty, so it appears that the warranty introduction from 2010 onwards has improved the reliability perception for the Cee’d as a whole.
‘Indeed it is Glass’s findings that residual value performance is very much linked to the desirability of the vehicle in the used marketplace and reliability expectations are a key component of this. Established brands should score highly here due to their perceived quality, but less established ‘challenger brands’ are often an unknown quantity for consumers and so can benefit from an extended warranty bundle.
‘It is likely therefore that Kia will see rising residual values in percentage terms over the coming years beyond the simple uplift from extended warranties as they continue to demonstrate to the market improved reliability and quality of their products against perceptions from some years ago.’