Why this is interesting: taking a cue from luxury classics, longer pre-owned warranty programmes from mainstream manufacturers could ease the psychological transition to a circular economy for cars.
Previously in Looking Out, I’ve written about the emerging interest in the circular economy among automotive OEMs.
And why shouldn’t they be interested?
By designing products that are locked in to a build-sell-use-refurbish-resale ecosystem that they control, they can build a vehicle once and make margin on it for years to come.
It makes sense to pursue this as a strategy for new product, and especially EVs, which by virtue having far fewer moving parts, can have a longer service life than internal combustion engined (ICE) cars.
But what about the ICE fleet that we already have?
On the one hand, it’s going to take decades to replace it with EVs (whether we should is another question altogether, for another time).
On the other, the faster we can phase out the production of net new ICE cars, the sooner we’ll meaningfully reduce their proportion of the overall fleet, and the tailpipe emissions associated with them.
One way to achieve this is to keep the existing ICE fleet in service for longer by encouraging people to buy used instead of new, and to hold on to their cars for longer.
At the top end of the market, manufacturers already help their customers do this, although brand burnishing, rather than sustainability, is the likely motivation.
Porsche offers a certified pre-owned warranty that covers vehicles up to 13 years old, and with up to 124,000 miles or 200,000 km on the clock. And services like Porsche Classic, Mercedes-Benz Classic and Ferrari Classiche will keep their respective greatest hits in perfect order, with factory-warranted parts and service.
Keeping cars in the family like this not only keeps the cars in circulation for longer, but it also helps maintain their value in the eyes of the market; sellers will tout the presence of a Porsche extended warranty or Ferrari Classiche certification in their sales pitch.
But what about mainstream manufacturers?
Mass-market certified pre-owned schemes aren’t uncommon, but they typically top out at about 6 years in the United States, where the average vehicle is now over 12 years old.
Recently, however, Acura and Honda announced that they will offer warranty coverage on vehicles up to 10 years old, for 100 days, or 5,000 miles after purchase, whichever comes first.
While no where near as generous as Porsche’s programme, the net effect is likely to be the same for manufacturer and customer: higher retained values, and more loyal customers, who’ll enjoy a longer stress-free service life for their cars.
CPO programmes signal to car buyers that the manufacturer has long term confidence in their product. If customers know that they’re not going to get left high and dry, then they’re more likely to consider buying used, and holding on to their car for longer.
I’m curious to see how these programmes could develop, because if they’re pitched right, they could be an effective tool to reduce the reliance on producing net new ICE vehicles, and help transition the car market to a more circular footing.
Image: Porsche