1engineer
Moderator
[MENTION=114439]Curly Jefferson[/MENTION] had an interesting question in another thread and [MENTION=84331]diverscale[/MENTION], rightly so, said to take it to a new thread, so here it is.
Why does Toyota only offer a 3/36 bumper to bumper and a 5/50 powertrain warranty when many other OEMs offer all kinds of warranties, some up to 120K miles? I mean, reliability and durability is what is touted about the 4Runner right? They should be able to offer some great long life warranty since they never break down much right? Um, no.
I am going to give you an answer but first you must get rid of any preconceived notions on what warranty really is and is not! I am kind of uniquely qualified to answer this because in the past I have been on global warranty teams that designed warranty programs from the initial offering to developing policy and ending up determining what should and should nt be covered. I have did this for two different global companies. Ready?
What is a "Warranty" as it applies to a product like our 4Runners?
Warranty is nothing but a sales tool. Here, let me bold that: WARRANTY IS NOTHING BUT A SALES TOOL.
Harsh statement right? Let me explain.
A warranty (in the 4Runner context) is basically a contract stating that if a specific part or assembly breaks due to fault of manufacturer within a certain metric that the manufacturer will replace the part and include the labor to do so. I did not make this statement all legal-like so we can keep it in plain text here.
Wait a minute 1engineer... I thought warranty was to protect us from getting a shoddy POS put together vehicle and to keep us protected when something breaks and it's their fault! No. Sorry. Laws and courts will protect you there. Warranties are offered by manufacturers (and third parties) to entice you to buy the vehicle, nothing else. They were designed to ease your mind from worrying about defects and poor workmanship and transfer money from your pocket to theirs. I know, but being blunt is sometimes the only way I can communicate.
Another way to look at this is a sales concession. How so? If a warranty is offered, it will be used. If the OEM makes a quality product then the warranty won't be used much. If the OEM makes a shoddy product then the warranty will be used quite often. All this is taken into account long before the vehicle is ever produced and the cost of the warranty is added into the selling price.
So what about the terms? Why do some OEMs offer a long term standard warranty and some offer a short term warranty? Ah, now we are getting into the part that is sales! Question: Knowing what you know, would you buy a Blapobeater (my new car company) with a 12 month/12K mile warranty? Now, would you buy a 4Runner with the same? Which one would you buy? Sure, it would be the 4Runner because of the past reputation. No brainer. Now, what if the Blapobeater offered a 7 year 120K bumper to bumper and Toyota only offered the 3/36? That changes things right? You could buy the Blapobeater knowing that if anything breaks in 120K miles it is covered and you could sleep at night. Problem is that warranty that Blapobeater was forced to offer cost them a LOT of money in future profit. Toyota offered the 3/36 and it didn't cost them much. Now here is where it gets interesting:
Blapobeater can't put all that warranty cost for the life of the vehicle into that vehicle. It would price it out of the market. It had to offer that warranty so it could sell that car. Now it needs to recoup the costs and make some money. So Blapobeater will need to be creative. It will price it high and give it's dealers huge room to discount. It will offer rebates and sales. It will offer tons of Blapobeater Performance Mods from a cool Blapobeater catalog. It will offer lots of Blapobeater tech that will entice customers to buy Blapobeater and finally it will advertise is every media outlet it can because at Blapobeater, they know the only way they will get to a profit is selling a LOT of Blapobeaters.
Seriously, Toyota could offer a longer warranty. If they did it would cost more per vehicle and they would add the cost into the vehicle. Toyota and a few others choose not to do so because the business model they have now (reliability, durability and shorter warranty) works for them. Companies like Blapobeater have chosen a different business model (Lower quality longer warranty) and that model works for them too.
So in reality either way is fine. Sure it would be great if Toyota offered a 10 year 200K warranty. The problem is you would have to pay more money up front in the price of the vehicle. Companies like Blapobeater could offer a reduced warranty like 3/36 but while they could sell at a lower price initially they would lose because nobody would want to buy a vehicle with lots of problems without a great warranty. Hope this helps some of you.
Why does Toyota only offer a 3/36 bumper to bumper and a 5/50 powertrain warranty when many other OEMs offer all kinds of warranties, some up to 120K miles? I mean, reliability and durability is what is touted about the 4Runner right? They should be able to offer some great long life warranty since they never break down much right? Um, no.
I am going to give you an answer but first you must get rid of any preconceived notions on what warranty really is and is not! I am kind of uniquely qualified to answer this because in the past I have been on global warranty teams that designed warranty programs from the initial offering to developing policy and ending up determining what should and should nt be covered. I have did this for two different global companies. Ready?
What is a "Warranty" as it applies to a product like our 4Runners?
Warranty is nothing but a sales tool. Here, let me bold that: WARRANTY IS NOTHING BUT A SALES TOOL.
Harsh statement right? Let me explain.
A warranty (in the 4Runner context) is basically a contract stating that if a specific part or assembly breaks due to fault of manufacturer within a certain metric that the manufacturer will replace the part and include the labor to do so. I did not make this statement all legal-like so we can keep it in plain text here.
Wait a minute 1engineer... I thought warranty was to protect us from getting a shoddy POS put together vehicle and to keep us protected when something breaks and it's their fault! No. Sorry. Laws and courts will protect you there. Warranties are offered by manufacturers (and third parties) to entice you to buy the vehicle, nothing else. They were designed to ease your mind from worrying about defects and poor workmanship and transfer money from your pocket to theirs. I know, but being blunt is sometimes the only way I can communicate.
Another way to look at this is a sales concession. How so? If a warranty is offered, it will be used. If the OEM makes a quality product then the warranty won't be used much. If the OEM makes a shoddy product then the warranty will be used quite often. All this is taken into account long before the vehicle is ever produced and the cost of the warranty is added into the selling price.
So what about the terms? Why do some OEMs offer a long term standard warranty and some offer a short term warranty? Ah, now we are getting into the part that is sales! Question: Knowing what you know, would you buy a Blapobeater (my new car company) with a 12 month/12K mile warranty? Now, would you buy a 4Runner with the same? Which one would you buy? Sure, it would be the 4Runner because of the past reputation. No brainer. Now, what if the Blapobeater offered a 7 year 120K bumper to bumper and Toyota only offered the 3/36? That changes things right? You could buy the Blapobeater knowing that if anything breaks in 120K miles it is covered and you could sleep at night. Problem is that warranty that Blapobeater was forced to offer cost them a LOT of money in future profit. Toyota offered the 3/36 and it didn't cost them much. Now here is where it gets interesting:
Blapobeater can't put all that warranty cost for the life of the vehicle into that vehicle. It would price it out of the market. It had to offer that warranty so it could sell that car. Now it needs to recoup the costs and make some money. So Blapobeater will need to be creative. It will price it high and give it's dealers huge room to discount. It will offer rebates and sales. It will offer tons of Blapobeater Performance Mods from a cool Blapobeater catalog. It will offer lots of Blapobeater tech that will entice customers to buy Blapobeater and finally it will advertise is every media outlet it can because at Blapobeater, they know the only way they will get to a profit is selling a LOT of Blapobeaters.
Seriously, Toyota could offer a longer warranty. If they did it would cost more per vehicle and they would add the cost into the vehicle. Toyota and a few others choose not to do so because the business model they have now (reliability, durability and shorter warranty) works for them. Companies like Blapobeater have chosen a different business model (Lower quality longer warranty) and that model works for them too.
So in reality either way is fine. Sure it would be great if Toyota offered a 10 year 200K warranty. The problem is you would have to pay more money up front in the price of the vehicle. Companies like Blapobeater could offer a reduced warranty like 3/36 but while they could sell at a lower price initially they would lose because nobody would want to buy a vehicle with lots of problems without a great warranty. Hope this helps some of you.
arty:
