- The Washington Times - Thursday, May 22, 2003

Most new-car shoppers are interested in a vehicle’s warranty only after the vehicle is bought and it breaks.

The average consumer couldn’t care less, said Wes Brown, analyst at auto research firm Nextrend in Thousand Oaks, Calif.

But there are exceptions.

Studies show buyers of new Korean-branded vehicles are reassured by the industry-leading warranties — good for up to 10 years or 100,000 miles on powertrain components — provided by Kia and Hyundai.

And in the used-car market, increasing numbers of buyers in recent years have been drawn to so-called certified used cars that include some kind of factory warranty.

Sales of new Kias and Hyundais as well as certified used vehicles industrywide all set records in 2002.

Auto analysts and executives say shoppers tend to prioritize warranty coverage, based on their perceptions and expectations about vehicle quality, and then factor it among other priorities such as affordability, styling and safety.

People know that when they buy a new car, the manufacturer is there, said Roger Sears, product manager for the Pontiac Bonneville and Grand Prix at General Motors Corp. “A problem that happens, they’re covered on the warranty. It’s pretty much a three-year, no-sweat situation.” A basic GM warranty runs for three years or 36,000 miles, whichever comes first.

Mr. Sears also said that Pontiac buyers generally tend to rank exterior styling, fun-to-drive character, interior styling, price and manufacturer reputation well ahead of warranty coverage.

But because early Hyundais from South Korea suffered from poor quality in the late 1980s, longer-length new-car warranties offered by Hyundai and Kia have been well received, said George Peterson, president of the auto research firm AutoPacific Inc. in Tustin, Calif..

“For Hyundai and Kia, the warranty is the No. 1 reason a person gives for choosing their vehicle,” he said. “For certain brands, the warranty is a key part of the selling proposition. It really gives these brands credibility and gives consumers the confidence to know they can depend on the brand supporting them.”

Peter Butterfield, chief executive officer at Kia Motors America Inc., notes that Kia, the seller of low-priced cars, a minivan and a sport utility vehicle, is relatively new to the United States, with just eight years of sales.

Before Kia upgraded its warranty, “the No. 1 reason to buy a Kia was value. Now, it’s the warranty,” he said. “It has been a significant enabler to extend the Kia brand to a group of people who questioned the Kia brand.”

Kia and Hyundai provide limited bumper-to-bumper warranty coverage of five years or 60,000 miles on each new vehicle. Limited powertrain coverage lasts for 10 years or 100,000 miles for the original owner and the owner’s immediate family.

If the vehicle is sold to someone outside the family, the limited powertrain warranty coverage is capped at five years or 60,000 miles.

Meantime, basic new-car warranties on mainstream models such as Honda tend to average three years or 36,000 miles. Honda provides three years or 36,000 miles of coverage for major powertrain components. This is the same as it has been for several model years.

Many GM and Ford brands provide similar new-car coverage for three years or 36,000 miles, while in recent years luxury brands such as Mercedes-Benz, Cadillac and Lincoln have upped basic warranty coverage to four years or 50,000 miles on new models.

None has followed the new-car warranties of Kia and Hyundai, however.

Sales of new Kia models totaled 237,345 last year, up from 223,727 in 2001. Hyundai sales rose from 346,235 in 2001 to 375,119. This was in a year when the overall auto industry was down 1.9 percent.

Meantime, certified used vehicle sales last year topped more than 1.2 million for the first time.

While still a small number compared with the total used vehicle market of more than 40 million, last year’s certified vehicle sales are a major jump from 2001’s 685,000.

Differentiating the lower-mileage certified used vehicles are manufacturer-provided warranties. Certified used vehicles can include up to a year of warranty coverage on non-powertrain items and powertrain coverage extending as long as seven years or 100,000 miles of a car’s life, dating from its initial in-service date, in the case of Acura and Honda.

Studies show certified vehicles usually sell for as much as $1,500 more than non-certified models.

With a used car, it’s a different situation entirely. Because it’s a used car and you’re not exactly sure who had it before you, you need more assurance from the seller that, well, what you’re buying is not a pig in a poke. You still want something that you can rely on, because it’s still a fairly large investment, Pontiac’s Mr. Sears said.

GM was the biggest seller of certified vehicles last year, with more than 325,000 sales. Toyota was second and Ford was third.

What’s the future for warranties?

Mr. Butterfield said he hopes that at some point, Kia’s brand value will be so strong that it won’t have to offer the longer warranty.

And Mr. Sears said GM is studying Chrysler’s upgraded powertrain warranty announced last year. Specifically, while Chrysler Group’s Dodge, Chrysler and Jeep brands retain basic vehicle coverage of three years or 36,000 miles, the limited warranty on major powertrain components increased to seven years or 70,000 miles on vehicles sold or leased as of last July 9.

Though a deductible applies, this warranty is transferable to the next owner, regardless of whether he or she is a family member.

“Simply stated, our overall quality levels have improved substantially, while warranty costs have dropped 20 percent in the latest model year, and have been cut in half since 1996,” Dieter Zetsche, Chrysler Group president and chief executive officer, said in announcing the longer-length warranty.

Still, even with the additional warranty coverage, sales of Chrysler Group vehicles haven’t zoomed.

“That was an attempt to differentiate themselves from GM and Ford, and I suppose from the imports as well,” Mr. Sears said.

“I’m sure there’s a whole cast of people within Ford and GM both looking at the Chrysler experience, trying to figure out, ‘Should we respond to that?’ So far, we’ve not. And I don’t know that it has hurt us, quite frankly.

“But there may come a time when it will, so it’ll be governed by competitive actions and customer demand, like most everything else.”


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