Automotive Extended Warranty Market Outlook
The global automotive extended warranty market size was valued at USD 49.18 Billion in 2021 and is expected to reach USD 78.19 Billion in 2030, expanding at a CAGR of 5.4% during the forecast period.
The overall incremental opportunity is estimated to be USD 29.01 Billion from 2022 to 2030. An automotive extended warranty, also known as a service contract, is a type of protection plan that covers the cost of repairs or replacement of certain parts and systems in a vehicle after the manufacturer's warranty has expired.
Automotive Extended Warranty Market Dynamics
Increasing vehicle sales
The number of vehicles that require repairs or maintenance is increasing with the growing number of car sales, thus driving the market for extended automotive warranties. In 2021, approximately 82.6 million vehicles were sold compared to 78.7 million in 2020. These vehicles included 56.3 million passenger cars and 26.2 million commercial vehicles.
Furthermore, car manufacturers offer extended warranties with comprehensive coverage options to compete for market share. This can lead to an increase in the availability and variety of automotive extended warranties in the market. Thus, increased competition among car manufacturers, providing extended warranties, is boosting the market.
Limited OEM warranty period
The limitations of the manufacturer warranty, as well as financial protection against unexpected repair costs among consumers is driving the extended warranty market sales. The limited warranty offered by automobile manufacturers typically covers the repair or replacement of certain parts or components of the vehicles for a certain period of time or mileage, usually ranging from 3 to 5 years or 36,000 to 60,000 miles.
Once the limited warranty expires, the vehicle owner is responsible for the repair or maintenance costs. This limited coverage period is not enough to cover all the potential repair costs that arise during the lifetime of the vehicle. This leads to the need for an extended warranty, which covers repairs to major components, such as the engine, transmission, and other electric systems, as well as other parts and systems that are not covered under the manufacturer’s warranty.
Rising awareness among young population
Rising consumer awareness, especially among the young population, is playing a significant role in driving the global automotive extended warranty market. Young consumers are becoming more knowledgeable about the potential costs and risks associated with owning a vehicle. With the increasing complexity of modern cars and the rising cost of repairs and maintenance, consumers are looking for ways to protect themselves from unexpected expenses.
Furthermore, the young generation is likely to use more technology to research and purchase products, including automotive extended warranties. They use online platforms to compare and differentiate the available options, read reviews, and make informed decisions.
Additionally, young consumers are likely to keep their vehicles for a long period of time, which means that they are expected to encounter issues with the increasing age of their vehicles. These factors are boosting the market demand among the young population.
High cost associated with extended warranty
One of the primary restraints of the automotive extended warranty market is the cost of these warranties. Extended warranties are expensive, which is expected to be a significant deterrent for customers. The cost of an extended warranty is usually a significant percentage of the vehicle’s total value and the additional cost of the vehicle purchase.
This is expected to lead to decreased demand for extended warranties. Furthermore, extended warranties do not cover certain types of repairs or have certain exclusions that limit their usefulness. This can lead to customer dissatisfaction and a decrease in demand for extended warranties, which further restrains the automotive extended warranty market
Regulations Governing Warranty
The automotive extended warranty market is subject to regulations that add costs and complexity for providers. Compliance with these regulations also limits the types of products and services that the providers offer. For instance, in the US, many state insurance commissioners regulate extended warranties as service contracts.
The regulatory structure necessitates warranty provider licensure or registration, financial solvency regulation, and service contract consumer disclosures. Service warranty providers apply for licensure or registration and then sell their products, typically at the point of sale. Vehicle service contracts are a type of extended warranty that is typically regulated by the states as insurance in the US. The regulations vary from state to state, and many states have adopted a ‘Service Contract Model Act’ to reduce the complications.
Advancements in warranty technology
The advancements in warranty technology are likely to create lucrative opportunities for the automotive extended warranty market in the coming years. These advancements in warranty technology include the use of GPS, blockchain, big data, and predictive analytics. Predictive analytics algorithms analyze vast amounts of data to identify patterns that indicate potential failures or issues with a vehicle. This allows manufacturers and warranty providers to proactively address issues before they become major problems, reduce the number of claims and improve customer satisfaction.
Artificial Intelligence (AI) is another technology that is expected to have a significant impact on the automotive extended warranty market. AI algorithms are used to analyze data from various sources, including telematics devices, repair records, and customer feedback, to identify patterns and make predictions about potential issues with a vehicle.
This helps warranty providers to offer additional targeted coverage options and improve customer satisfaction by reducing the number of unexpected repairs. These factors are expected to help the market in gaining significant momentum in the near future, which in turn, is anticipated to boost the market during the forecast period.
Scope of Automotive Extended Warranty Market Report
The report on the global automotive extended warranty market includes an assessment of the market, trends, segments, and regional markets. Overview and dynamics have also been included in the report.
Automotive Extended Warranty Market – Global Industry Analysis, Size, Volume, Share, Growth, Trends, and Forecast
Coverage (Powertrain Coverage, Stated Component Coverage, Exclusionary Coverage), Vehicle Age (New Vehicle, Used Vehicle), By Distribution Channel (Auto Dealers/Manufacturers, and Third-Party Providers), Application (Personal, Commercial)
North America, Europe, Asia Pacific, Latin America, and Middle East & Africa
Company Share, Market Analysis and Size, Competitive Landscape, Growth Factors, and Trends, and Revenue Forecast
Key Players Covered
Volkswagen AG, Honda Motor Co., Ltd, General Motors, Tata Motors, AmTrust Financial, Toyota Motor Corporation, AXA Partners Holding SA, CarShield, Protect My Car, Endurance Warranty Services, LLC, Toco Warranty Corp, Concord Auto Protect, Auto Advantage Inc., CARCHEX, AAA Warranty Services, AutoCon (India) Assistance & Administration Private Limited
Automotive Extended Warranty Market Segment Insights
The global automotive extended warranty market is segmented on the basis of coverage, vehicle age, distribution channel, application and regions.
In terms of coverage, the automotive extended warranty market is segmented into powertrain coverage, stated component coverage, exclusionary coverage. The PACAS exclusionary coverage segment is projected to hold a substantial share of the market in 2021, due to the highest level of protection offered by it.
Based on the vehicle age, the automotive extended warranty market is segmented into new vehicle, used vehicle. The used vehicle segment is projected to hold a substantial share of the market in 2021, owing to the protection provided by it against unexpected repair cost.
Based on regions, the automotive extended warranty market is segmented into North America, Europe, Asia Pacific, Latin America, and Middle East & Africa. The market in the Asia Pacific is projected to expand at a significant CAGR during the forecast period. The market in Asia Pacific is projected to expand at a significant CAGR during the forecast period. The region is expected to continue its dominance in the coming years, owing to the increasing investment by the players.
Key Benefits for Industry Participants & Stakeholders
- In-depth Analysis of the Global automotive extended warranty market
- Historical, Current and Projected Market Size in terms of Value and Volume
- Potential & Niche Segments and Regions Exhibiting Promising Growth Covered
- Industry Drivers, Restraints and Opportunities Covered in the Study
- Recent Industry Trends and Developments
- Competitive Landscape & Strategies of Key Players
- Neutral Perspective on Global automotive extended warranty market Performance
- Powertrain Coverage
- Stated Component Coverage
- Exclusionary Coverage
- Auto Dealers/Manufacturers
- Third-Party Providers
- North America
- Asia Pacific
- Latin America
- Middle East & Africa
Key Market Players Profiled in the Report
- Volkswagen AG
- Honda Motor Co., Ltd
- General Motors
- Tata Motors
- AmTrust Financial
- Toyota Motor Corporation
- AXA Partners Holding SA
- Protect My Car
- Endurance Warranty Services, LLC
- Toco Warranty Corp
- Concord Auto Protect
- Auto Advantage Inc.
- AAA Warranty Services
- AutoCon (India) Assistance & Administration Private Limited
Top players in the market include Volkswagen AG, Honda Motor Co., Ltd, General Motors, Tata Motors, AmTrust Financial, Toyota Motor Corporation, AXA Partners Holding SA, CarShield, Protect My Car, Endurance Warranty Services, LLC, Toco Warranty Corp, Concord Auto Protect, Auto Advantage. These companies are considered key manufacturers of the automotive extended warranty market based on their revenue, product offerings, regional presence, and supply chain management system. The players are adopting key strategies such as acquisition, collaborations, and geographical expansion which the potential opportunity for the automotive extended warranty market.