Extended car warranty guide 2020
An extended warranty can give you peace of mind if you own or are buying a car that’s a few years old. We take a look at the pros and cons...
New cars come with a manufacturer’s warranty that should provide peace of mind for anything from three to seven years. However, if you’re planning to keep your car for longer than that, or you’re buying a used car that’s out of its warranty period, you might be considering taking out an extended warranty.
A warranty is an insurance policy between you and the manufacturer or warranty supplier that’s designed to cover the cost of repairing or replacing faulty components, provided those items come under the terms of the warranty.
What are the different types of extended warranty?
There are three main types of extended car warranty or mechanical breakdown insurance: a manufacturer’s own extended warranty, which you can purchase when the car is new or before the original warranty runs out; a used car warranty supplied by a franchised car dealership or car supermarket, and a warranty that you can buy from an independent provider.
What do extended warranties cover?
Whichever type of warranty you choose, the foremost requirement is that it should protect you against the unexpected failure of important components and systems on your car, such as the engine, gearbox, electrics, steering and suspension. Items that stop working due to wear and tear can also be covered, as we’ll explain later, but it’s the expensive major components that you need to worry about first.
All extended warranties should tell you which items they cover, as well as stating any that are excluded. If that’s unclear, or the policy’s terms and conditions aren’t easily accessible, our advice would be to steer clear of that product.
Many warranties sold by independent companies will allow you to choose the level of cover you require and the items you want covered. So, if you want insurance against the braking system or infotainment system failing, for example, you can specify this. The cost of the warranty will generally depend on the car’s age, the make and model and your typical annual mileage.
What should I look out for?
The range of warranty products available is wide, and you need to make sure that you’re comparing like for like, as well as that the products you’re considering will be suitable. There are three key phrases that you need to understand and watch out for in your extended warranty contract: ‘betterment’, ‘consequential failure’ and ‘wear and tear’.
Betterment means that if your car requires a new part to get it up and running again, some warranty providers will send you a bill, because the new part is better than the original one and, as such, has increased the value of the car. If that part is a new engine or gearbox, it could leave you facing a bill for thousands of pounds. Make sure you understand the warranty provider’s position on betterment before you sign anything.
A consequential failure is when a part that is covered by your warranty fails and also causes the failure of another part that isn’t covered. Some providers will make you pay for repairing the parts not explicitly covered by the warranty.
As for wear and tear, no warranty provider can cover all consumables – even the more comprehensive ones don’t cover things like batteries, brake pads and clutch plates – but we’d strongly recommend that you choose a policy that includes cover for various other items that are likely to wear out or fail over time. Make sure you understand what level of wear and tear cover it offers up front.
Some policies stipulate that you must have your car inspected prior to wear and tear cover being offered. In this instance, you’re likely to have to pay for any necessary repairs before the policy starts. If you don’t, you either won’t be able to take out wear and tear cover, or it might be deferred for a period of time, so the insurer isn’t liable to pay for parts that are already at or close to the end of their working life when the policy starts.
Other things to consider
Like manufacturers’ warranties, extended warranties will only cover cars up to a specified age and mileage, and if you exceed the stated mileage, you will invalidate your warranty.
It’s also important to find out whether there’s a cap on the amount of money that the policy will pay out for a single failed item; this could be as low as £1000 under the cheapest level of cover.
When it comes to labour costs, you need to check that they’re included and if there’s a maximum hourly rate. Some cheaper policies will only pay out for work that’s charged at a maximum of £35 an hour – far less than the rates charged by many service departments.
Unlike manufacturer-provided new car warranties, which can’t tie you in to main dealer servicing, extended warranties – both aftermarket and manufacturer-supplied ones – can legally stipulate that the car must be serviced by a franchised dealership or one of the provider’s partner garages. If you want to pick the garage yourself, don’t take out cover that restricts your choice.
Most extended warranties will require you to have your car serviced within 30 days of the stipulated date, and you’ll need to stick to this in order to ensure that your cover remains valid. Book your car in for servicing as close
as possible to the specified date, and be sure to speak to the warranty provider if you think you’re going to miss it.
It might be worth opting to include a small excess fee with your premium, because this could save you a significant amount of money. Adding a £50 excess to the Warranty Direct quote for the Audi Q7 in our price comparison table (see right) reduces the annual cost by £226.
Where should I buy an extended warranty?
When buying a used car, don’t simply buy the warranty that’s offered by the dealer. Instead, shop around on comparison websites; there are numerous providers out there and some great deals to be had.
Whichever warranty you choose, we’d recommend going for one from a provider that’s signed up to The Motor Ombudsman’s Vehicle Warranty Products Code. This means you’ll be getting a warranty that is backed up by Trading Standards, plus you can benefit from The Motor Ombudsman’s help should something go wrong.
Stand-alone warranty providers often offer cheaper policies than those from car makers, but the cover might not be as comprehensive and they might not cover betterment or consequential failure items. That said, some aftermarket providers also offer different tiers of cover, allowing you to choose what’s included. Just remember to do your research up front to ensure the policy you choose covers everything you expect it to.
What do I do if something goes wrong?
If you have a complaint, write to the warranty provider, stating the relevant facts. If your complaint isn’t dealt with satisfactorily and the warranty provider subscribes to the Vehicle Warranty Products Code, you should lodge a formal complaint with the The Motor Ombudsman.
If the warranty you’ve chosen isn’t backed by the code, you should approach the Financial Ombudsman Service, which handles complaints relating to insurance products.
Am I actually better off without a warranty?
You don’t have to take out an extended warranty when you buy a car, of course; your decision on whether to do so will depend on how risk-averse you are, how much disposable income you have to pay for any repairs yourself, and how reliable your car is.
The most recent What Car? Reliability Survey showed that 30% of cars aged between five and 15 years old suffered a problem and that 19% of the issues were fixed for free by franchised dealerships, despite the fact that most of them were out of their new car warranty period. And there’s a good chance that you won’t need the cover of an extended warranty if you buy one of the more reliable makes and models.
To highlight the differences in repair costs, we’ve used our survey data to outline the average annual repair costs for four popular five-star used cars, all first registered in 2015.
Owners of Audi Q7s paid out nothing to have faults repaired, according to our data. Although half of the cars we were told about suffered a fault, they were all fixed for free.The cost of a 12-month extended warranty for a Q7 ranges from £475 to £1561.
As for the BMW 3 Series, only 22% had a problem, and of those, 71% were fixed under warranty. Of the rest, although a small percentage of bills exceeded £1500, the average cost was £550, which is less than the cost of most extended warranties for the 3 Series.
However, the average repair bill for Mazda CX-5 owners who had to pay for repairs was £542, which is more than most of the warranties for this car would cost.
Meanwhile, Volkswagen Golf owners who had to pay for repairs shelled out an average of £769, which is more than all six warranty quotes that we obtained for the model.
How extended warranty providers compare on price
We’ve compared the cost of an extended warranty for four of our favourite used cars, bringing together cover provided by the car maker and from five independent providers. We’ve gathered quotes for the most comprehensive cover available from each source, for cars first registered in 2015 that have covered 50,000 miles.
The prices are for 12 months’ cover, paid in one lump sum, and with no excess charges unless stated otherwise.
The levels of cover do vary, so we’d advise you to check out exactly what’s included in any extended warranty policy before you buy it.
|Provider||Audi Q7 3.0 TDI S Line||BMW 320d SE||Mazda CX-5 2.0 SE-L||VW Golf 1.4 TSI Match|
|ALA (RAC Warranty)||£475||£295||£295||£295|
* £100 excess
** £7000 limit per claim
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