Volkswagen and the Magical Shrinking Warranty

This week Volkswagen announced a new, improved, “all singing, all dancing” warranty scheme for its 2009 models. Basically it boils down to the fact that VW is once again offering free scheduled maintenance for the full term of the bumper to bumper warranty. The downside is that the 4 year / 50,000 mile coverage has been reduced to 3 years / 36,000 miles. In addition VW has upped the mileage intervals for service from 5,000 miles to 10,000 miles, so what buyers are getting in exchange for one less year of coverage is three oil changes (theoretically using synthetic oil, but what the dealership will actually be pouring in there is anybody’s guess). The lone exception will be the Chrysler built Routan minivan which will have 6,000 mile service intervals.

So why did VW do this? I think there are several reasons. The most important is that VW is looking to reduce costs. Volkswagen has stated in the past that it going to try and bring its products more in line with American’s expectations for both content and price. To date, VW has not been very successful in trying to increase the sticker prices of its cars. VW has reduced the prices on both the Jetta and Rabbit models to help drum up sales. One way to help pay for the lower pricing is to de-content and reducing the warranty by one year and 14,000 miles in exchange for three oil changes is a great way to do that. The 3/36 coverage is on par with most of its competitors and the free maintenance is a bonus. This move also further differentiates the brand from its upscale counterpart, Audi, which has a 4/50 warranty. Interestingly enough, Audi along with Mercedes and Jaguar cut their free maintenance scheme.

I have to admit that the free maintenance is a great way to distract customers from the reduced warranty coverage. Talk about a spoon full of sugar to help the medicine go down! As a consumer, I’m disappointed with VW’s move, but I do understand that this alignment is probably in the best interest of the brand’s health. I do hope that VW continues an aggressive campaign to work out its quality gremlins. I really love the GTI and the new CC looks great. I also have high hopes for the Tiguan, especially if they give the States a TDI option. Because of VW’s quality wobbles, I always advise prospective VW customers to fully investigate their VW dealer’s service department before buying. Now that VW is shortening its warranty, making sure that you’ve got a great team watching your back is even more important.