Personally I would pick the 1 year warranty for my own car and use a trusted builder. As everyone has said the defective trans will act up within the first few months. After that it is no different than buying a new car. The extra few grand is just profit for the trans shop as long as their 1 year trans are built the same as the 10 year trans. Just like lifetime starter or alternators, you pay a little extra for the warranty, but don't get any better quality. people pay full pop for ACDelco or Mopar replacement parts that only have a 1 year warranty over lifetime auto store specials.
we sell chrome wheels and tint in our dealership and offer lifetime warranty to the original purchaser. they are priced higher than others, but they don't offer lifetime warranties. Most people will trade out after a few years, well before any wear issues will surface. The ones you made out on will far outweigh the few warranty issues you have. The lifetime warranty is a very big deal to noncar people. We get jaded knowing how to fix and repair our own cars and think it is silly for someone to pay $100+ per hour to change out spark plugs at a dealership or shop. However people will pay for peace of mind, so offering the longer warranties can make very good business sense. Again-build your parts the correct way and sell the warranties based on the risk and their value. For instance if you think you will only pay out on 1 out of every 50 warranties sold then price the warranties so 25 warranty sales can go towards the inevitable warranty claim, but the next 25 would be pure profit. From a customer standpoint of the noncar guy again a lifetime warranty looks like you are buying a better product than the one year deal. We do trans and motors all the time, but on late model stuff people do not plan to ever replace a major part like that, they just trade into the next vehicle. So when they do have to do a trans or motor it comes as a suprise and they try to go the safest routes they can afford. Personally I see motor failures as a perfect excuse for an upgrade!
P.S.; Personally I vote for one year, but from a business standpoint I would offer a longer option as well. I assume your bread and butter isn't from gearheads on message boards? What percentage of your business is from "car guys"?
