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Should you or shouldn’t you? From July 1, you’ll no longer need to buy a service plan with your new vehicle. Instead of the obligatory, manufacturer-approved plan that currently requires you to have your vehicle serviced and maintained by a franchised dealer, you’ll be able to buy one that lets you take the vehicle to any workshop you choose.
If you wish, you won’t have to buy a plan at all. You can pay all your bills as they crop up during the lifetime of the vehicle.
The Competition Commission, in the final version of its “Guidelines for Competition in the SA Automotive Aftermarket”, hopes to break up what some consider a cosy, closed-shop arrangement between motor companies and their franchised dealers.
Opponents say the arrangement allows dealers to overcharge customers for service and maintenance, and motor companies to protect their profits by insisting on the use of own-brand replacement parts, even if cheaper options of equal quality are available.
Gunther Schmitz , chair of the Right to Repair SA lobby group, speaks for most nonfranchised service providers when he describes the change as “in the consumer interest”. He says: “More competition always leads to better prices, better quality and better service.”
The Competition Commission has also set out to shake up the vehicle repair market by encouraging insurance companies to expand their list of approved panelbeaters and repair shops. It suggests this sector is also uncompetitive.
Until now, the purchase price of a new vehicle has automatically included a warranty and a service plan. In simple terms, the first is the manufacturer’s guarantee that the vehicle won’t let you down, and covers mainly mechanical failures; the second pays for your vehicle’s service, including the replacement of standard parts, but not for wear-and-tear. That may be covered by a maintenance plan, sold separately.
From July 1, the warranty will remain part of the purchase package. Customers, however, will have the choice of whether to buy a service plan, and who should manage it. Motor companies and their dealers are generally coy about the cost of service plans but, according to one dealer, separating them “should knock at least R30,000-R40,000 off the purchase price of a medium car”.
Whether you use some of that saving to buy a separate plan will be up to you. Mark Dommisse, chair of the National Automobile Dealers’ Association (Nada), says you’d be crazy not to. Service plans, he says, bring planning and predictability to the cost of vehicle ownership.
At the same time, he admits the traditional service plan is not suited to everyone. We all know of someone who uses their vehicle only for occasional visits to the shops (there are many more now that Covid-19 has persuaded millions of people to work from home). If you are driving 7,000km annually, should you really be paying for a service plan that covers you for five years and 100,000km?
Likewise, what is the value to an Uber driver who travels 100,000km in a matter of months?
As July 1 approaches, more service and maintenance plans are becoming available. Insurers and banks are among companies offering them. It’s in their interest to do so. The last thing they want is a market full of clients unable to afford huge maintenance and repair bills, or assets with plummeting values because they have incomplete service histories. Customers taking the risk may face higher premiums.
They will be able to continue service and maintenance through franchised dealers but will also have the right to use an independent – anything from a national chain down to backyard workshops. Dealers must explain this right when selling a vehicle.
But with freedom comes responsibility. If you go to an independent, make sure it has the wherewithal to service your vehicle properly. A modern engine awash with computer technology needs more than spanners and screwdrivers.
That’s not to suggest independents are inferior to dealers. Some are a match and they all have a part to play in the service chain. Many have the potential but lack the experience and expensive equipment necessary for modern technology. Any inappropriate work or damage by them could void part of the manufacturer warranty and leave you facing a big repair bill. Independents must inform customers upfront ”in clear and precise terms” of potential risks.
They must also disclose whether they have insurance to cover costs if anything goes wrong. Schmitz says: “We strongly advise motorists to make sure (independents) have sufficient defective-workmanship and liability insurance.”
There’s a similar warning when it comes to selecting repairers for vehicle damage after July 1. In most cases, insurers will choose but sometimes motorists will make the call. Richard Green, national director of the SA Motor Body Repairers’ Association, says those whose vehicle is covered by a warranty should use manufacturer-approved repairers.
He says: “If a nonapproved repairer replaces a part on your vehicle … the warranty on that vehicle will be suspended until an extensive post-repair check has been done by a manufacturer-appointed agent. If they find the repairs to be substandard they may permanently suspend the warranty in the repaired area.”
For the time being, these changes are voluntary guidelines only – though the commission has indicated it will make them compulsory if necessary. Nada and the Automotive Business Council, which represents motor companies, have both said they will comply.
Consumers encountering problems can complain to the motor industry ombudsman. Ombudsman Johan van Vreden says: “Because it’s a voluntary programme, it’s not clear what kind of issues, and how many, will crop up. We’re not expecting a rush of complaints but we don’t know. If it happens, we will hire more technicians to investigate. We will have the necessary capacity.”
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Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.