Car Warranties

•  Quick guide to Car Repair Warranties
• Rough Price Guide
• Car warranty Companies
• Car Warranty Glossary

Here at Garage Advisor we know how much it can cost when things start going wrong with your car, so its not surprising that lots of people see it as a good idea to buy extended car warranties.

Once upon a time independent car warranties were not worth the paper they were written on, fortunately nowadays that has changed, however with all the choice and marketing out there it can some times be a bit daunting as to which policy is best for you. So we set about to provide you with a guide to help you compare which car warranty is right for you.

What is a Used Car Warranty?

 

When you buy a new car from a dealer you also buy peace of mind in the form of a Warranty.  The manufacturer of the car you have bought is so confident in its build quality that they are prepared to guarantee various parts of the car from failure.

 

When you buy a used car, the dealer or private owner may or may not have a full history of the car and therefor unable to provide 100% comfort that there are no hidden concerns. Whilst most reputable traders will do what they can to secure as much history of the car the fact is that they cannot stand guarantee that the car is mechanically or structurally sound.

 

When you buy a used car it is unlikely that the original manufacturer’s Warranty will still be valid. There are exceptions to this and you should always enquire if the original Warranty may be transferred in your own name. For instance, Toyota offer a five year Warranty on its new cars and, if you are purchasing a Toyota less than five years old then some or all of this Warranty may be transferrable. Each manufacturer’s Warranty differs in terms of its inclusions, exclusions and terms and conditions. If you are being offered the transfer of an existing Warranty then you should check exactly what is being covered. Sometimes the transfer of a Warranty may incur a small administration charge so be sure that the Warranty is what you need before you accept it. There would be little point in paying for the transfer of an existing Warranty that only covers corrosion to the bodywork when the engine is not sound.

 

Fortunately there are companies who offer Used Car Warranty’s.

A Used Car Warranty, also known as Mechanical Breakdown Insurance (MBI), is offered by specialist companies and financial services groups. They are offered in much the same way that insurance is offered. These companies are taking the risk of the vehicle on your behalf by accepting some liability for the car in exchange for a premium paid by you.

There are many different forms of Warranty available from various companies. Each policy has different inclusions, exclusions, terms and conditions plus minimum terms. As a result the premiums offered in the market vary greatly. It is the aim of this guide to help you understand the differences in what is being offered and to help you make a decision on what Warranty is most suitable for you and the car you are purchasing.

 

Why would I want/need one?

 

First of all, you do not have to have a Warranty. It is not a legal requirement like having insurance and if any dealer or seller tries to sell you a Warranty on this basis then you should carefully consider the deal you are making. A Warranty offers peace of mind and potentially can save you a lot of money in the event of problems with the car.

In 2005, Warranty Direct commissioned a study of 26,000 of its policies to identify the cars most likely to suffer some form of mechanical or electrical failure aged between three and five years old. They used the data to calculate the average cost of repair and they reported the following findings:

 

 

Warranty Direct further concluded that 1 in 3 cars aged between four and nine years old breaks down each year with the average cost of a repair being £273.50

 

According to a similar report commissioned by Car Care Plan in 2007, the average repair costs of various component failures (across all car makes and model) were as follows:

 

Component	Average Cost for Repair
Turbocharger	£602
Cylinder head gasket	£444
Air flow meter	£286
Water pump	£195
Alternator	£225
Radiator	£208
Clutch assembly	£399
Gearbox	£887
Electric window motor	£313

 

Though we all hope that we are purchasing one of the lucky 2 in 3 cars that does not break down each year, the staggering costs for some of these repair bills may be enough to prompt you to consider a Warranty.

 

What Types of Warranty can I buy?

 

All Warranties differ and we will discuss later on what things to look for in a Warranty and what to avoid but normally there are two types of Warranty:

 

·         Simple Mechanical Breakdown

·         Comprehensive Cover

 

A word of caution: Just because you have opted for ‘Comprehensive’ cover, you should still ensure that you have read the small print and considered what is covered and what is not. A comprehensive policy may cover more than the simple mechanical cover but there could be exclusions.

 

Warranties are offered for varying terms from 12 months onwards. You can purchase the Warranty in advance to reduce the annual cost or renew the Warranty annually. Some companies offer credit and will allow you to pay the Warranty monthly. There is usually a fee for providing the credit which is in addition to the Insurance Premium Tax.

 

Some companies may try to incorporate other services such as car insurance, GAP protection and breakdown cover. Be sure to understand what is being offered as part of the Warranty and what is being offered in addition. Only buy what you need and be careful of paying for the same cover twice through different parties. Some current accounts now include breakdown assistance as part of their member services.

 

What should I look for in a used car Warranty?

 

Claim Limits

 

Most Warranties will have some form of claim limit. You should check to see how much each individual claim is limited to. In some cases, you may be able to claim up to the value of the car – be warned that this may not be what you paid for the car but the prevailing list value.

 

It goes without saying that you should be wary of paying for a Warranty which has a claim limit of a few hundred pounds. You should make sure that the limits match the likely cost of repair. See the above table for guidance on likely cost of repairs.

 

Additional Services

 

Some companies offer various ‘bolt-ons’ to the Warranty such as breakdown cover, car hire, emergency hotel accommodation and travel costs in the event that the failure incurs additional out of pocket expenses. These come at a cost and you should consider whether you are covered by other companies such as your insurance or bank accounts before you opt for this additional protection.

 

Excess

 

Look out for excess charges and ensure that these are as low as possible. If the average cost of repair is £273.50 then it would not be sensible to accept a Warranty with an excess of £200. Some companies use a percentage excess which increases the amount you pay relative to the increase in your mileage.

 

Car Mileage

 

Look to see if there are any limits to either your annual or total mileage. Some companies place a limit on mileage and won’t pay for repairs over and above these limits.

 

Choice of Garage

 

Some Warranty providers will stipulate the network of garages that you can choose from to repair the car. This is to ensure that the hourly rates paid by the Warranty company are fixed and they can be sure of the quality of work being performed on the car. If this does not worry you then you should be sure that there is a garage which is local to you or that the cost to deliver/collect the car before and after the work is completed is included – don’t be tied in to dropping your car off in Cardiff if you live in London!

 

Look for a Warranty provider that allows you to choose where you get your car repaired. If they do, always make sure that the hourly rates are agreed before you arrange for work to be done. You may have a car that is specialist and you want to use a more expensive repairer. If so, you may have to pay the difference in rates.

 

You will need to ensure that wherever you have your car repaired, even if you do not have the repairs covered under the Warranty, is a reputable one as any poor workmanship which later results in a claim may not be covered by your policy.

 

Car Age limit

 

Most providers will only offer cover for cars up to a certain age. This can be 7 years, 9 years but rarely above 10 years. If your car is approaching the maximum age allowed on your cover then you may decide not to bother with a Warranty at all.

 

Are they regulated?

 

You should always ensure that your Warranty provider is regulated by the FSA and that you have a standard 14-day cooling off period. In addition, the Association of British Insurers provide a voluntary code for Extended Warranties and you might wish to check to see if your provider has signed up to this code.

 

 

 

 

Minimum Period of Scheme

 

Some Warranties state that you cannot claim against their policy within a fixed period of time. Whilst this is to prevent unscrupulous parties purchasing a Warranty for a vehicle with pre-existing faults you do not wish to find yourself within a month of your new purchase, having paid for a policy which won’t pay out. Check the minimum term.

 

Parts & Labour

 

You should check that the policy covers the full cost of repair and not just parts or labour.

 

Special Conditions to Warranty

 

In addition to all of the above there may be special conditions which you must adhere to in order to remain within your Warranties terms.

 

You may be required to keep the car serviced according to the manufacturer’s schedule, and maintain all of the paperwork in order to prove this.

 

Most Warranties also warn that your cover will be invalidated if you fit non-standard parts or use the vehicle for anything other than for Social, Domestic or Pleasure Use with occasional Business Use. If you are planning on using the car for commercial purposes (tax/driving school/courier), competitions (rallying, racing etc) or off-road then you will need to specific this to your provider and ensure that the correct cover is selected.

 

All pre-existing faults will be excluded from your cover and you should ensure that when you purchase your used car that you look carefully in the log book and paperwork for evidence of any faults. If the car has already had a replacement turbocharger then this may not be covered on your new policy.

 

A Warranty does not cover any claims resulting from accidents, theft or fire and will not pay out on top of your own insurance for such damages.

 

What should I avoid with used car Warranties?

 

Consequential loss

 

This refers to exclusions on repairs which occur as a result of the failure of other parts. So for example, the engine was the primary fault but as a result of the failure other components require replacement or repair. A policy with consequential loss as an exclusion would not cover any secondary damages as a result of the primary failure.

 

Betterment

 

The term betterment refers to repairs which enhance the value of the vehicle and therefore make the car more valuable than before the repair. This can happen if you have a new engine fitted, which could improve the value of the car. Some Warranties will make you pay for part of the cost.

 

Wear and tear

 

Whilst most companies do not offer cover on ‘wear and tear’ items such as tyres, exhaust, brake pads and catalysts as such claims be endless, there are some Warranties which do offer some wear and tear cover. If there is some cover on these items, you should check whether you will be asked to pay toward the cost of such parts.

What don’t they cover?

 

As a bare minimum, your Warranty should cover the engine, ignition, gearbox, steering and suspension.

 

Again, each Warranty will differ but you should always ensure you have looked at the exclusions. If you are buying a simple mechanical breakdown policy then many additional electronic areas of the car will not be covered.

 

If you have a car which has AC then you can opt for additional AC cover. It is not usual for Satellite Navigation or Audio systems to be covered.

 

On the whole, most policies do not cover the external bodywork, glass, paint and lights or anything which could be considered ‘wear and tear’ such as tyres, brake pads, exhausts, catalysts, hoses, and clutch friction plates. 

 

Many policies do not cover repairs which are found to be the result of incorrect fuel, oil, lubricant or coolant being used so be careful when topping up the oil!

 

Oil leaks are not generally covered.

Where can I buy a used car Warranty?

 

If you are buying a used car from a dealer then you may be offered a Warranty with the purchase and may form part of the deal you negotiate. If you are buying from a main dealer then the Warranty should be similar to that which was offered by the manufacturer. You should check the detail of what is being offered before signing and consider what cost you could purchase similar cover from an independent provider. If you are able to match the cover from an alternative source then perhaps you can negotiate a further cash discount from the cost of the vehicle.

 

Independent dealers will usually only offer Warranties from one source and this will vary by trader so ensure that you check what is being offered and compare costs and cover before signing. Don’t feel compelled to take the Warranty being offered by the dealer. Do your own homework and use the results to help you negotiate the best deal for your car.

 

You can also buy a used car Warranty directly from an independent provider for a car you already own. There are many companies on the market but here are some of the larger providers:

 

·         Warranty Direct

·         Warrantywise

·         AA Warranty

·         RAC

·         Click4Warranty

·         UVW

 

Each of the companies above offers a different level of cover and, whilst price differences may make one policy seem more attractive than the other, you should of course compare the detail.

 

To give you an idea of the variances, we have asked for a quotation for an Audi A4 SE, registered in 2005 with current mileage of 40,000 and an expected annual mileage of less than 15,000.

 

Company	Product Name	Cost for 1 Year	Comments
Warranty Direct	SecureCare	£295.55	Capped labour rate of £60 per hour £50 excess per claim
UVW	Executive 1	£270.35	Claim limited to value of car Includes Betterment Clause
Warranty Wise	Custom Plan	£322.07	Capped Labour of £35 per hour £1000 claim limit £250 excess No mileage limit

 

You can see already that, whilst there is a small difference in the premium, some of the differences in labour rates and excess may make you think about which policy is most suitable for you – if you choose to purchase one at all!

 

Should I Self-Insure?

 

According to the reliability index (www.reliabilityindex.com) the average repair bill for an Audi A4 is £430.22 and the car has a lower than average reliability rating meaning that the likelihood of parts failing during its life is greater.

 

For other cars, such as the Honda Civic, the average cost of repair is much lower at £282.36 and has a much better reliability rating. You may wish to consider the risk associated with the car you are looking to cover and decide whether you would be better off ‘self-insuring’.

 

Self-Insuring is the term used for paying the premium you would have paid a Warranty company into a savings or deposit account each year. You are effectively taking the risk that the value of your savings will exceed the likely cost of repairs in the future.

 

For some, this may work very well but for others, particularly if the failure occurs within the first year or you end up facing a large repair bill then you could find yourself wishing you had taken that Warranty after all.

 

Self-insurance is not appropriate for everyone and very much depends on how risk averse you are.

Can I get cover for any car?

 

Unfortunately not, if your car is over 10 years old, has recorded over 120,000 miles, has not had regular servicing or is a specialist car then you may find it difficult to get it covered. If your car meets the following criteria then you should be able to find cover:

·         Under 10 years old?

·         Less than 120,000 miles?

·         Serviced in last year?

·         No modifications?

·         Not performance or specialist car?

·         Used for Social, Domestic and Commuting only?

 

 

Car Type	Warranty Direct	Warranty Wise	Click4Warranty	UVW
Honda Jazz 1.4  2009  FSH	Luxury care policy £361.27	Level 4 £318.00	5star cover + all options £213.79	Executive plus +extras £447.17
Mercedes Slk 1.8  2005  FSH	Extra care policy £715.00	Level 4 £711.92	5star cover + all options £415.40	Executive + extras £787.09
Ford Mondeo 2.0 2003 FSH	Secure care policy £502.92	Level 3 cover+ fulladditions £446.48	5star cover + all options £257.50	Executive + extras £445.29