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Volkswagen makes five-year warranty permanent

Toyota under pressure now that seven of the Top 10 brands have extended coverage
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PRESSURE is mounting on market leader to Toyota to increase its warranty from three years now that most Top 10 brands offer five- or seven-year coverage.

German giant Volkswagen is the latest manufacturer to make five-year warranty permanent across the range after announcing this morning it will extend indefinitely the coverage it launched in October.

“The business has gauged reaction to its five-year warranty campaign and so decided to implement it on an ongoing basis,” said Volkswagen Group Australia’s Director of Customer Experience and Marketing, Jason Bradshaw.

Volkswagen’s five-year/unlimited kilometre protection will apply to all models across the range, from the Polo hatch to the Crafter van and everything in between. It will also include authorised accessories purchased with the vehicle.

The addition of Volkswagen to the roster of brands with extended warranty coverage means seven of the Top 10 manufacturers now go the extra mile.

Among the Top 10 only Toyota, Nissan and Subaru are holding out with a comparatively short three-year warranty, although Subaru is offering five-year coverage on certain models until December 31.

Volkswagen is the fourth manufacturer this year alone to boost warranty coverage from three years to five, after Ford, Holden and Mazda. Honda added five-year coverage in 2017 (see list below).

Volkswagen is also the first German manufacturer with a five-year warranty locally; Audi, BMW and Mercedes each have three-year coverage.

The boost to factory-backed warranties follows an investigation by the Australian Competition and Consumer Commission (ACCC) which has taken several leading brands to task over how they handle customer complaints.

In the past 18 months Ford, Holden and Hyundai have each signed court enforceable undertakings with the ACCC to get cars fixed quicker or, where appropriate, offer a refund or a replacement vehicle.

Earlier this year Toyota Australia sales and market boss Sean Hanley said the company had no plans to increase warranty from three years/100,000km.

“At this stage Toyota Australia has no plans to extend its warranty on new vehicles … we will continue to offer outstanding service to our customers and I can assure you our warranty obligations are aligned to Australian Consumer Law,” Mr Hanley told media in August 2018 at the launch of the new generation Toyota Corolla hatch.

In the same month, the boss of Hyundai Australia said his company was considering boosting warranty coverage from five years to seven because the rest of the industry had caught up, diminishing what was once a marketing advantage.

“Honestly we are studying it,” Hyundai Australia chief executive JW Lee told media at the Hyundai Tucson launch in August 2018

“Nowadays five years warranty is not that unique … so we need to consider how we differentiate from the others but there are many things we need to take into consideration.”

Kia, which has the best warranty among the Top 10 brands with seven-years/unlimited kilometre protection, said in April this year it would consider boosting coverage to 10 years if other brands closed in.

Outside the Top 10, other brands with five year warranty include China’s LDV and Haval, and French twins Peugeot and Citroen. Ssangyong and MG have seven year coverage on certain models.

Increasing warranty coverage is not necessarily straightforward because car-makers must budget for it.

Each manufacturer holds back a portion of the profit from each vehicle to go into a pool of funds to cover future warranty costs.

Adding a longer warranty means more money must be kept aside for each new car sold.

Some car companies pay for the extra warranty coverage out of their local marketing budgets, others are paid for by the factory overseas.


The long road to extended warranty coverage

Hyundai: first car maker in Australia with permanent factory-backed five-year warranty coverage, program launches in 1999.

Mitsubishi: six years later Mitsubishi joins Hyundai with permanent factory-backed five-year coverage from December 2004.

Kia: Hyundai’s sister brand Kia increases warranty coverage from five to seven years, industry-leading at the time, from October 2014.

Skoda: Volkswagen’s Czech brand increases warranty coverage from three years to five from January 2017.

Honda: five-year warranty becomes standard across the range from July 2017. Has since offered seven-year warranty coverage on selected models during certain monthly sales promotions.

Ford: after dabbling with five-year warranty during monthly sales promotions over the preceding years, Ford makes five-year warranty standard across the range from May 2018.

Holden: after dabbling with five- and seven-year warranty coverage across various models during 2017 Holden makes five-year coverage standard across the range from July 2018.

Mazda: boosts its permanent factory-backed warranty coverage to five years from August 2018.

Hyundai: the boss of Hyundai Australia says the brand is considering moving from five- to seven-years warranty given that most other Top 10 brands have caught up.

Volkswagen: introduces five-year warranty coverage as a sales promotion from October to December 2018. Announces in mid-December five-year warranty will become permanent across the range from January 2019.

Mainstream brands sticking with three-year warranty … for now

Toyota: the market leader for the past 15 years in a row says it has no plans to offer a five-year warranty however insiders say it is under consideration.

Nissan: offered five-year coverage as a sales promotion in August and September 2018 but claims it didn’t provide a big enough boost to sales so has since reverted to three-year coverage.

Subaru: has offered five-year warranty on and off in recent years -- and currently has a five-year warranty and five-year roadside assistance promotion running on certain models from mid-October 2018 to 31 December 2018. However, when asked about a switch to permanent five-year coverage Subaru has said it has no plans to change.