Warranty prices, because the reliability record of the brand won’t get you out of buying a warranty. No matter how durable that Land Cruiser is, once you see this:
You’re going to end up wanting a warranty. Because we all know electronics are the least robust products one can buy and go out faster than the McRib. It’s amazing to me the amount of fragility and lack of life spans we have come to accept and happily pay a premium for. But here’s the thing, that warranty is going to become a larger and larger part of what sells cars.
Now brand new vehicles have the advantage of fantastic warranties being standard. Your buddy’s Rolls Royce comes with a 4-year/unlimited mileage basic warranty. Did you buy a Koenigsegg Agera? You got a 3-year/unlimited mileage basic warranty on that. Of course all that cost is baked into the engineering to make sure a powerful majority of the vehicles survive out their warranties. High end vehicles end up with unlimited mileage warranties because most people can’t afford to maintain them or take the depreciation hit of additional mileage. This is partly why you make sure the wear items are expensive! If the vehicle is cheap to run and unreliable, you got yourself a poor business decision.
So new cars aren’t an issue, they have been at this place for quite some time. This means it’s all about pre-owned, baby! Mmm, that sweet, now cheap, luxury we thrive on. Yeah, that’s where you’ll notice some differences in the way we shop. Why do Certified Pre-Owned programs and Carmax get so much love? Reliable extensions to the factory warranties. Both CPO and great third party warranty offerings invest a lot of time and resources into making sure that vehicle isn’t going to cost a fortune by insuring the vehicle is as close to being the equivalent of a new car with a couple of boogers under the seat in order to have no real chance of dealing with a major warranty claim.
Now of course you’re gonna pay a premium for this warranty regardless because who knows if you’ll need to claim replacing the entire fuel system due to an issue with spiders in the gas gap from the factory. Therefore, if your warranty provider thinks it will cost on average of $500 in claims over an additional 2-years/30,000 miles, you’re going to pay $1,500 for that warranty because some glorified blogger with a fetish for breaking British cars will create $9,000 in warranty claims, meaning it takes 9 people to cover that jerk plus their own vehicles for the warranties to break even on the simplest budgeting tactic.
This is the part where I get into the vehicles that will be the biggest issues. I’m talking about the used cars that aren’t thoroughly inspected and certified by the manufacturer to hold the absolute minimum levels of warranty liability. The other 99% of pre-owned cars. Since these are unknowns with endless variables and interlaced, fragile thingama-glowies you are going to see used car prices at all time lows but crazy expensive warranties if you opt for them. I’m saying you’ll still find used car prices staying the same even though the cars become increasingly more sophisticated because they expect to make money on the warranty end instead.
Imagine I have a car and will sell it for $12,000 where everyone else is selling the same thing for $15,000. I’m banking on you buying my $3,000 warranty on the vehicle and financing that amount so that I can take on that interest. With very high end models at higher lists prices (say a $50,000 Aston Martin), I can see warranties having the same premiums and monthly/quarterly/bi-yearly payment plans as insurance.
That’s going to bite...