Comprehensive warranty plans from automobile manufacturers reduced industry demand
Los Angeles, CA (PRWEB) July 26, 2013
The Auto Extended Warranty Providers industry has suffered losses from a slow economy and changing trends in auto warranties. Over the past five years, industry revenue declined at an average annual rate of 1.1% to $4.2 billion. The average age of vehicle fleet increased at an average annual rate of 1.2% over the past five years, causing demand for the industry to decline as a high percentage of extended warranty plans are purchased at the same time as the vehicle. Consequently, industry revenue is expected to decline 0.6% in 2013.
"Changing trends in warranty plans offered by auto manufacturers and dealerships have caused increased competition for third-party auto extended warranty providers," says IBISWorld industry analyst Andrew Krabeepetcharat. "Automobile manufacturers are increasingly offering more comprehensive warranty plans, making extended warranty less attractive to new car buyers." Consequently, industry firms were forced to cut prices in order to stay competitive with extended warranty offerings from auto manufacturers and dealerships. As a result of price competition, profit margin for industry firms declined over the past five years.
The Auto Extended Warranty Providers industry exhibits a low-level of market share concentration. "In the five years to 2013, IBISWorld expects that market concentration increased marginally, primarily due to a number of acquisitions and partnership developments undertaken by the industry's major players," says Krabeepetcharat.
During the five years to 2018, industry revenue is forecast to increase. As the economy improves and consumers have higher per capita disposable income, more consumers will purchase new cars and consequently more extended warranty plans. Also, the average age of vehicle fleet is expected to decline, prompting more consumers to purchase extended warranties for new car purchases. However, growth will continue to be hampered by competition from warranty plans offered by auto manufacturers and car dealerships. For more information, visit IBISWorld’s Auto Extended Warranty Providers in the US industry report page.
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IBISWorld industry Report Key Topics
This industry provides automobile owners with extended warranty protection. The manufacturer or the authorized auto dealer does not underwrite these warranties, which extend beyond the manufacturer and dealer warranties. This type of warranty is purchased after the manufacturer or authorized dealer warranty expires. As a result, these warranties are primarily provided by a third-party organization.
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