Comprehensive warranty plans from automobile manufacturers reduced industry demand.
New York, NY (PRWEB) August 15, 2014
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 has declined at an average annual rate of 0.3% to $4.3 billion. The average age of the vehicle fleet has increased at an average annual rate of 2.4% 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 1.4% in 2014 alone.
“Changing trends in warranty plans offered by auto manufacturers and dealerships have caused increased competition for third-party auto extended warranty providers,” according to IBISWorld Industry Analyst Brandon Ruiz. 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, industry profit is expected to decline during the five years to 2014.
During the five years to 2019, industry revenue is forecast to increase. As the economy improves and consumers are more willing to finance big-ticket items, more consumers will purchase new cars and, consequently, more extended warranty plans. “Also, the average age of the vehicle fleet is expected to decline, prompting more consumers to purchase extended warranties for new car purchases,” says Ruiz. 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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