Warranties – it pays to check the details

Drivers are keeping their cars longer than ever, due mainly to the economic downturn but also because cars are far more reliable than they ever have been. If a modern car is regularly serviced and well maintained there is no reason why it shouldn’t last a long time and although modern day technology and gadgetry is evolving quickly most cars these days will now have essentially comfortable features as standard, such as power steering, CD player, electric windows and maybe even a/c. Whilst deciding to keep a car which may fall out of the initial manufacturer’s warranty, which is usually 3 yrs but some give more, it is important for peace of mind to have a warranty policy which covers potentially expensive items which could conceivably cost you more than the value of the car! So what warranty should you go for and how much should you pay for the level of cover you require? These are the $64,000 questions asked everyday and customers, and bizarrely some sales people or service advisors who sell these products, are still unsure what is covered themselves. Although great strides have been made to ensure that policies are less ambiguous it is still hard for some drivers to make an informed choice as they may have absolutely no knowledge of how a car works and are therefore in the hands of the experts to lead them in the right direction.

Generally of course most customers, when asked what kind of level of warranty they want, will opt for the cheapest whilst still expecting it to cover everything and if a policy is not explained correctly and a customer brings the car in to make a claim, they cannot understand why it may not be covered. How many times have you taken your car in with a problem to be told that your warranty does not cover this part or that component? This inevitably leaves you with the feeling that it’s not worth the paper it is written on when in reality you may not have the level of cover you require for the age model and driving conditions for which the car is used for. For instance there is no point having a maximum claim limit of £500 on a large 4wd which, when anything serious goes wrong, could cost many times that. Also if a customer has a car which is worth less than £5,000 and may not have air con and electric packs or other potentially expensive repair items they may not need top of the range cover whereas more expensive cars with more sophisticated systems electrical problems are more likely than mechanical ones and therefore the cover and cost and claim rate must reflect that need.

Unfortunately from a customer’s point of view it is still hit and miss as to what warranty you end up with because the selling of warranty policies depends on the knowledge and experience of the person selling it. One thing is for sure, if a warranty is being upgraded to cover the potential time a customer will have a car or that their budget can stretch to, it is well worth ensuring that before you buy such a policy you are happy the person selling it knows what they are talking about. Ask questions which are important to you, how many claims can I make? What is and isn’t covered and can I have an overview in writing? Is it parts and labour? Is there any excess to pay? Does it come with breakdown cover?

Remember cars will always go wrong otherwise manufactures wouldn’t need to give 3 year warranties on brand new cars and with the ever increasing sophistication of modern cars it is important that when covering the cost of potential component defects that you know what your exposure could be.

For greater piece of mind it is probably better to have a respected name to back up a warranty product but bear in mind that products in the name of the RAC or the AA are more likely to be actually operated by a third party so it will pay to read the key facts to see who is actually underwriting and managing the policy. Whatever the case it is likely these products will offer some recourse and hopefully a clearer understanding of what is involved, but as with many ‘distress’ sold products it is always worth reading the small print to understand every aspect of a policy and, more importantly, its limitations before buying it.

The key thing is to try and balance the exposure to the cost of repair against the likely risk of failure and the cost of the warranty premium. Why have a £5,000 claim limit if the average cost of repairs is £600? This is particularly the case if the premium itself costs around the £400 mark. It’s probably better to look for a warranty that enables you to choose the claim value yourself, rather like insurance excess in reverse.

As always do your homework, shop around and get the best deal you can.

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One Response to Warranties – it pays to check the details

  1. Lawjaw November 18, 2009 at 6:25 pm #

    At Lawgistics we receive many enquiries from motor dealers where their customers have become very dissatisfied as a result of an insurance warranty claim taking too long to resolve or being turned down due to a loophole.

    In 2006 Auto Trader conducted a survey amongst more than 1200 motorists across the UK. Almost 45% of respondents said warranties are not worth the paper they are written on. Over 30% claimed they had not been dealt with satisfactorily and over 40% said that their claims had been invalidated through the ‘small print.’

    In 2008 What Car published the top complaints to their helpdesk, with ‘My warranty claim has been refused – they say it’s wear and tear’, coming in as number four.

    Sadly many warranties do not live up to the ‘peace of mind’ they first promised. And unfortunately, when your customer becomes dissatisfied with their warranty it reflects badly on you and your company. Warranties should deal with issues before they become complaints, not make them worse.

    Many dealers view warranties as their own protection and often turn customers with problems away, hiding behind the warranty and refusing a customer claim. As a retailer you have Sale of Goods duties and the warranty (which should enhance basic Sale of Goods rights) often has less customer rights than are automatically there when a vehicle is sold.

    Your customers’ legal rights cannot be restricted by the warranty and your customer can always potentially claim for compensation arising from the breakdown of a component that has failed. For instance, a failed timing belt often leads to a serious engine failure and a failed cylinder head gasket can lead to a ‘cooked’ engine. There may be a charge for recovery or vehicle hire and in some cases the consequential loss may extend to an overnight stay in a hotel. Unfortunately, you could be liable for all of this and much more!

    When choosing the right warranty you should consider the following:

    The Level of Cover

    If you are looking at insurance backed warranties make sure the cover is comprehensive, i.e. all mechanical and all electrical components are covered. A poor level of cover could result in you having to contribute towards a claim.

    However, if you are considering a dealer backed warranty you should choose a warranty with listed components as this will help mange difficult claims, although you should always take legal advice on your customers’ legal rights before refusing a claim.

    The Terms and Conditions

    It is important for you to make sure that the warranty terms and conditions are not unfair. The Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs) protect consumers against unfair standard terms in contracts and The Office of Fair Trading, together with certain other bodies, can take legal action to prevent the use of such terms.

    Watch out for servicing loopholes, i.e. the vehicle must be serviced six months or six thousand miles after the date of purchase and then in accordance with the manufacturers recommendation.

    If you are looking at insurance backed warranties you need to check that there are no restrictions on labour rates. And then make sure that diagnostics, recovery and vehicle hire are included or you could end up paying for them yourself.

    The Exclusions

    Although the level of cover in some warranties may look comprehensive this can soon change when you look at the exclusions. If wear and tear is excluded you can almost guarantee that most claims for second hand vehicles will be turned down. And if consequential damage is excluded you can be sure you will be contributing something towards the claim.

    Here is a list of typical exclusions:

    • General maintenance and components failing due to wear and tear

    • Consequential damage or damage to parts covered caused by parts not covered

    • Faults that were on the vehicle at time of purchase

    • Timing belts if no service history and not covered for damage caused by the failure of a worn-out timing belt

    • Over heating damage, cracked blocks, cracked cylinder heads, burnt valves, oil and fluid leaks

    • Recovery and vehicle hire

    Sadly these items are excluded from most insurance backed warranties and unfortunately could be covered by your customers’ legal rights.

    The Warranty Provider

    Choose a warranty provider that understands your liabilities and can give sound advice in awkward situations. Your warranty will only be as good as your warranty provider. It would be sad to see a good warranty let down by a poor administration service.

    Firstly, check that the warranty provider and their warranty complies with the EC Directive and FSA regulations.

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