Vehicle Service Contract Administration Fragmented industry with strong margins and accelerating acquisition activity A rebounding automotive sector and a modest recovery of the U.S. economy have driven significant growth in the market for vehicle service contracts (aka extended warranties).
- The top 25 administrators account for nearly 75% of industry revenues, and the top 10 administrators account for nearly half of industry revenues.
- VSC sales fluctuate with automobile sales, consumer confidence and the general economy. Sales are rebounding.
- The VSC market can be divided into integrated providers (sellers/ administrators that underwrite the contracts) and independent administrators (sellers/ administrators that place coverage with third parties).
- In the used vehicle segment, in particular, lenders often encourage customers to purchase VSCs; and the purchases are typically rolled into the auto loan.
- The U.S. vehicle service contract market is large and growing We estimate vehicle service contract sales totaled $14.7 billion in 2012, an increase of nearly 15%. Related revenues for administrators were an estimated $8.5.billion.
- VSC sales have grown at a compound annual rate of 13.5% since the trough in 2009. Over 100 VSC administrators and 30 VSC underwriters compete.
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