People often say that a car is a money pit and it's easy to see why. As well as the ever rising costs of petrol, insurance and tax you have the unknown quantity of what it will cost you when it goes wrong. Buying a brand new car doesn't necessarily get you off the hook either. Although you usually get a year or two's worth of manufacturer's warranty which gives you a stay of execution, the odds are long against at least some problems arising in the not-too distant future after that runs out.
However, it is possible to remove the threat of being stuck with an unexpected bill by taking out a third party warranty. Available on not just cars but vans and motorcycles too, these are a relatively new concept, having begun around 15 years ago. The basic premise is that for either a one-off fee or a monthly payment you can cover part or all of the costs of repairing your car when one of the thousands of electrical or mechanical parts within it breaks.
What does it cost?
Warranties start at somewhere in the region of £100 per year for a newer, budget vehicle, rising to approaching £1,000 for an older or more expensive one. You need to consider your quote against some typical costs of certain repairs that you could face: around £400 for a new clutch; around £1000 for a new gear box; and thousands for a complete new engine. Of course, your car might run like a dream all year, needing nothing more than a new tyre or two. But you have to think about what you'd do in the worst case scenario.
Some companies stipulate a maximum age for the vehicle they’ll provide warranties for – usually ten years old – and some set a maximum amount of miles that your vehicle can have on the clock. Even if you fall within these parameters though, the older your vehicle and the distance it has covered will affect what you pay, both in terms of your premium and possibly any contribution you are obliged to make to the cost of repairs.
The state of play
The warranty providers won't just take your word for it that your vehicle is in good nick when you take out your policy – you'll usually have to either prove that you have followed the manufacturer's servicing guidelines or comply with servicing obligations set by the warranty provider at set intervals in time and/or mileage. If your vehicle doesn't meet the servicing requirements when you take out a policy you will be given a set length of time to perform the necessary checks. Until you do so you won't be able to claim. Some companies stipulate that you can't claim within a certain amount of time after the policy starts regardless.
There's a myriad of other factors you need to check when deciding what policy is right for you.
Make sure you know the answers to the following questions:
- How much of the parts and labour costs involved in a repair will be covered by the warranty? How will this change as your vehicle gets older and you put more miles on the clock?
- Will you be charged an excess if you claim? Agreeing a voluntary excess could bring the initial price of the policy down.
- Where will your vehicle be taken for repair? Will it be to a reputable mechanics?
- Will the cost of the diagnosis of the fault be covered?
- What priority will the repairs be given by the mechanics? Can the warranty provider offer any guarantees or guidance on how long it will take you to get your vehicle back?
- Who will be responsible for the costs and logistics involved in transporting the car for repair?
- What is the very maximum amount you can claim for?
- Will your policy cover you for general wear and tear? If not, how will the company decide what constitutes a valid claim?
- What will your servicing obligations be?
- How long after your policy starts will you be able to claim?
- Does the company make any details available about what percentage of claims are successful? Does it state what circumstances lead to claims being rejected?
- Is the company authorised by the Financial Services Authority? This is not a regulatory requirement in all cases – it depends on the terms and conditions of the warranty and whether or not it is deemed to be an insurance product – but you can use it to boost your confidence in the provider.
Look at all of the options...
If you are buying a new car or a second hand one from a dealership it is worth finding out what the costs of any extended warranty through the dealer would be and how this compares to a quote from a third party provider. When weighing it up make sure you take all of the factors outlined above into consideration for both options – compare apples with apples to make your decision.
The sweeteners
Other related products like car insurance and breakdown cover very often come with throw-ins to try and help seal the deal – warranties are no different. You can often be offered discounted or free MOT tests and services, courtesy car provision or gadgets like satellite navigation systems. Ensure that freebies don't sway your judgement though. Make sure your main consideration is how much you have to pay when something goes wrong with your vehicle.
Click here to read more about car warranties and get a quote on Know Your Money.
Author: KYM Editor
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