VW Cutting 2 Years, 22,000 Miles Off Its New Car Warranty
According to Automotive News
, Volkswagen is getting rid of its 6-year/72,000 mile new car warranty in the US and is replacing it with a 4-year/50,000 mile warranty. But to make up for those 2-years they are going to include two-years of factory-covered maintenance starting with the 2020 models.
The move is supposed to free up advertising money for struggling dealers.
And to help its profit-struggling dealers, the German automaker is starting a new Tier 3 advertising program that will pay dealers up to $200 per vehicle to better "develop their local markets." The program is set to begin in the first quarter of 2020.
Volkswagen informed its dealers of the changes late last week.
Both are direct efforts by the German brand's new North American leadership team to address lingering issues with two different but equally important constituencies: consumers and its long-suffering dealer network.
For consumers, the amended warranty and maintenance program is a way to take on lingering doubts about Volkswagen's cost of ownership, while the new marketing help is a way to address lagging dealer profitability, said Duncan Movassaghi, senior vice president of sales and marketing with the Volkswagen brand's North American region. The move comes after Volkswagen conducted an internal evaluation of the costs and benefits of its current warranty, and determined that a change in strategy was in order.
Incentive to buy
By cutting the warranty coverage while adding two years of free scheduled maintenance, Movassaghi said, Volkswagen hopes to better encourage leasing and purchasing customers to choose its vehicles over competitors, especially those who cite overall cost of ownership as a critical factor in their purchase decision. The 4-year/50,000-mile warranty will still be transferable to subsequent owners.
While the warranty and maintenance package may help dealers sell move vehicles, the added Tier 3 co-op program is likely to add more to their bottom lines.