All Cars, All the Time

Could GM's New Powertrain Warranty Cost Its Dealers?


With GM touting its new 5 years/100,000 miles powertrain warranty in the hopes of luring new customers into the showroom, what does this mean for extended warranty sales that generate big cash for dealerships? In general, unless the car is a very popular model the profit that a domestic dealership makes on a new car sale is minimal. Much larger profits are to be made in the finance and insurance office where all sorts of cash generating products are sold. You know the drill: you’ve just negotiated a great price on your car and then when you go into the office to sign the paperwork you have to sit through a full court press made by the F&I sales officer: financing offers, maintenance contracts, paint protectants, extended warranties, yadda ,yadda. Well, if the vehicle comes with a long enough warranty, there is little temptation to buy the extended package from the dealer. It would take quite a few additional sales generated from the warranty program to offset the loss of those contracts. Of course this is all hypothetical, I’m not even sure that it is a real problem, but it’s a slow news day :-)