After-market warranties: are they worth the expense?
The product you buy will determine what is covered
As the economy slumps, drivers keep their cars for longer and sales of pre-owned cars boom. But the treatment that a car received from its previous owner is mostly an unknown factor - and an after-market warranty could mitigate this risk.
Unlike electric vehicles, cars that burn fuel are almost staggering in their complexity and contain many parts that can fail. If there's no warranty covering the car, the repair costs could derail the average consumer's personal finances.
What after-market warranties are available in SA?
According to David Chard, MD of warranties at the Automobile Association (AA), there are two types of warranties, though the boundaries aren't absolute. Type A kicks in when the factory warranty expires, and type B is usually bought when the customer buys a pre-owned car that no longer has a warranty. Because they perform the same function, we'll refer to both of them as after-market warranties.
So, what is a factory warranty?
It's the warranty you get with a brand-new car. Typically, it covers the car for three to five years, or 100,000km to 150,000km,
depending on the brand. If a component of the car does fail, the owner claims from the manufacturer. A factory warranty is normally the most comprehensive of all.
Andre Rhoodie, national warranty manager at Hyundai SA, offers a word of caution. "Be aware that not all items are covered until the factory warranty expires," he says.
"A clutch plate is seen as a wear-and-tear item, so it's only guaranteed for one year or 20,000km, while the engine and gearbox have a seven-year/200,000km warranty," Rhoodie explains.
"The warranty can also be void if the car isn't repaired at a Hyundai-approved panel beater after a collision," he says.
The message is, don't abuse your car (by riding the clutch) and expect the factory warranty - or any warranty - to cover it.
The after-market warranty
It's a lot like insurance against theft or collision damage for your car, but in this case it's for mechanical breakdowns. So, if a component breaks, the car owner claims from the warranty company (insurer) and not from the manufacturer of the vehicle.
Some warranties are paid for monthly, just like theft-and-damage insurance.
About 65% of policy
submit claims …
paying for peace of
Others are charged as a single amount when the car is sold brand new (and you decide you want to extend the standard warranty), when the warranty is about to expire, or when the car no longer has a warranty.
Gerhard Lourens, of Haval Silver Lakes in Pretoria, stresses the importance of reading the fine print of an after-market warranty.
"It's not a software agreement for an app, that you can quickly dismiss. It's more like a prenuptial agreement," he says. "Make sure the terms and conditions suit your requirements."
What they cover
The product you buy will determine what is covered, but usually it's the vital organs: engine, transmission (gearbox), clutch, suspension, brakes, radiator and the labour cost of replacing the parts.
Wear-and-tear items like tyres and brake pads are excluded, but there are other maintenance plans and policies available that cover these.
Other significant factors that determine what is covered are the mileage on the vehicle, what you use it for and what model it is. What you can afford, or are prepared to pay for the warranty, are additional factors, since some insurers offer different levels of cover from which you can choose.
Most insurers cover cars that are up to 12 years old or have completed up to 250,000km. But the older the car, the less cover each component will enjoy. An old engine is simply more likely to pack up.
What they don't cover
After-market insurer M-Sure says it does not pay for any cost above the component limit, components that had failed before the policy started, accident damage or repairs not authorised by them. These exclusions are true for most after-market warranties.
This is how the component limit works: Let's say a car's dual-clutch automatic gearbox is covered for R30,000 only. If it breaks, and a replacement box is R50,000, the car owner will have to find R20,000.
Also remember, the warranty constitutes a contract between you and the insurer, so you have to keep your end of the bargain by, for example, servicing the car at required intervals. This is in the fine print.
Are they worth the expense?
About 65% of policy owners never submit claims. So, when you part with a significant sum of money for that warranty, you're mostly paying for peace of mind.
Questions to help you decide if you need a warranty include: How much cash do I have? Do I have a car maintenance fund to which I contribute R500 to R1,500 monthly? Do I drive a fancy car with advanced functions, or a simpler car known for reliability? How would a repair bill of R60,000 affect me?
l Disclaimer: Car dealers earn a profit on the sale of after-market warranties. The AA also sells warranties.