Failure analysis and warranty modeling of used cars

Reliability is an important aspect of product perception and manufacturers are compelled to take corrective actions on the items failing within the warranty period. Automotive manufacturers are being exposed to significant operating costs as a result of warranty claims affecting an individual unit or mandatory (sometimes voluntary) recalls affecting a batch. Underlying principles of warranty modeling are built by considering both subjective issues and objective constraints such as competition, quality, and performance under the goal of achieving desired levels of reliability and cost in a balanced manner. This paper reviews the warranty cost models with an emphasis on the failure analysis of used vehicles. Expected warranty costs are calculated by taking into account the age, usage, and maintenance data of the product in question. Failure intensities and characteristics are identified in order to propose a policy that highlights the trade-off between the cost and the warranty length. A case study on a popular brand’s initiation of factory certified pre-owned program for the local automobile market of Turkey is presented in detail.

► This paper introduces warranty cost models suitable for used car industry.
► Reliability analysis of a European car brand is carried out.
► Trade-offs between warranty length and cost expectations is illustrated.
► Coverage extension beyond 2 years is found to cause losses to dealer.