Sears flexes muscle in used-car warranty business

Donna Harris covers automotive retailing for Automotive News
There's a new kid in town, but one with plenty of muscle.

Sears, known for its service contracts on electronics and appliances, has entered the used-vehicle warranty business. Participating dealers believe that brand name will go a long way to boost sales penetration.

But dealers have to be enrolled in the Sears repair center program to take advantage of it. Sears launched an auto repair franchise for new- and used-car dealers in late 2009 in a bid to attract Chrysler and GM dealers rejected in the bankruptcies.

Sears Authorized Independent Auto Centers entered a private-label agreement with CNA National Warranty Corp. to provide two programs -- a limited warranty for certified used vehicles and mechanical breakdown coverage.

Burke O'Malley, a northern Virginia Mazda, Subaru and Chevrolet dealer, converted his empty Saturn location into a Sears Auto Center. He's stocking up on used vehicles that would retail in the $12,000 to $15,000 range.

O'Malley believes the Sears name on the certified used vehicles and the garage will attract new customers who wouldn't think of shopping new-car dealerships for a car or for repair work. And they say they may even be able to convert some of them into new-vehicle buyers.

Who knows? If other franchised dealers see the conquest sales these dealers are making on maintenance and light repair, used vehicles and service plans, they might sign up with Sears.

Says O'Malley: “That's where we make our money.”