Aftermarket car repair warranties are now a popular purchase - here's what to look for
- Aftermarket car repair warranties are growing increasingly popular.
- In theory, they can help offset the cost of major repairs to new, newish, and used cars.
- But most are laden with terms and conditions - and some will only pay a portion of major repairs.
- Here's what to look out for if you're looking for an extended or used car warranty.
- For more stories go to www.BusinessInsider.co.za.
The world of car warranties, service plans, and maintenance plans is confusing - particularly when it comes to used vehicles.
Until fairly recently, these repair safety nets were available primarily for new, and relatively new, vehicles. Depending on which category the plan fell into, it typically lasted a few months, years, or a few hundred thousand kilometres.
New car dealers have used warranties, limited service and maintenance plans, and possible extensions to these, as value adds or up-sells. But when they expired, and the option to extend was no longer available, car owners were largely left to foot the bills for future repairs on their own.
But these days, aftermarket repair warranties and third-party extensions are becoming an increasingly popular way to reduce the burden of major automotive repairs.
They work much like insurance policies for maintenance - car owners make small monthly payments to a company that will then cover the cost of certain repairs. Most companies in the motor vehicle, insurance and financial services space are now making moves into this market - from the country's biggest banks through to niche aftermarket warranty companies.
As with insurance policies, however, these come with dense terms and conditions - you're in for a read of around 4,000 words per policy. Not all policies are created equal, either, and in most cases, you get what you pay for.
Most aftermarket warranties won't cover the cost of routine services or wear and tear - for those you'll need a service and maintenance plan. Some warranties may not cover the cost of a specific mechanical failure either, and all will only cover repairs to a certain value.
Coverage isn't only limited to vehicles with expiring manufacturer's warranties - it's also possible to purchase a pre-owned warranty for older cars, but most policies exclude very old vehicles.
For this reason, comparing all aftermarket warranties currently on the market is complex - but there are several factors worth considering before committing to a single business.
Most companies selling aftermarket car warranties use the quoting opportunity to mine your data - particularly if they're after a similar price. At best, they require you to part with a phone number and email address before offering a ballpark quote. At worst, some simply collect your data and promise an agent will call you back.
Data mining and up-selling opportunities aside, this is because premiums for aftermarket warranties depend on the type and age of the vehicle that's receiving cover, and what kind of coverage you're looking for.
Understandably, an old or rare car is likely to attract higher monthly instalments. And like insurance, certain risk factors such as driver age may also increase premiums - or disqualify coverage altogether.
Costs also depend on the extent of the coverage - the Automobile Association, for example, has at least seven different options that range from "Chrome" to "Titanium" with coverage limits of between R7,000 and R100,000.
Aftermarket warranties are not a significant monthly expense. At the bottom end, you can expect to pay around R100 per month, whereas premium packages cost up to R500 per month, depending on what you're driving, whether you're extending a warranty or signing up for one on a preowned vehicle, and exactly what coverage you're getting.
Some policies require holders to wait at least three months before claiming - presumably to reduce the risk of someone taking out a policy for an existing problem.
Most aftermarket warranty providers will require that your vehicle has an extensive service history. This is true whether you are extending a warranty on a relatively new car, or buying a new policy for a used vehicle. Some providers will waive this requirement if you take your car in for a service within one month of signing up.
What they cover
There's no standard list of what aftermarket warranties will cover, but most companies specify exactly what is included and excluded in their terms and conditions.
A deep dive into these conditions is crucial before signing up. Although most marketing material glibly promises cover of "parts, repairs and labour", asterisks almost always lead to a comprehensive list of parts, repairs, and labour that they will not cover.
In general coverage under warranties is limited to electrical failures and mechanical breakdowns. This means while some policies may cover the cost for the breakdown of things like air conditioners and braking systems, they likely won't pay for consumables such as air conditioner re-gassing or brake pads.
Most companies will only pay out for repairs up to a certain limit.
If, for example, the clutch goes on your 17-year-old Volkswagen Polo and you have an entry-level package, most companies identified by Business Insider South Africa will pay a maximum of R3,000 for its repair. Engine repairs for the same model are typically capped at R6,000.
More expensive packages on newer vehicles will likely pay out more - it's possible, for example, to receive up to R20,000 coverage for an engine issue on a premium warranty.
Any costs over and above these will need to come out of your pocket.
Genuine or generic parts
Where parts are covered and require replacing, some companies will only make use of original manufacturer parts. Others may opt only for generic parts. If original parts are important to you, it may be worth clarifying this fact with the company before agreeing to coverage.
It's also worth keeping in mind that original parts are typically more expensive, and may eat up your coverage amount faster than generic parts.
As with parts, not all repairs offered by warranty extensions will be at the original manufacturer. Some companies may require that claimants use a specific mechanic or franchise.
You can expect to receive some add-ons to entice you to sign up with specific companies. These typically include a combination of breakdown services, towing, emergency medical response, and car hire - but given how many companies offer similar services as part of their policies, these may be superfluous.
Selling your car
Most policies are tied to a specific vehicle and may run over a specific time frame of years or kilometres. This could be a problem if you sell your car before the aftermarket warranty lapses. But some companies allow you to transfer the policy to the new owner, provided premiums are paid up and the new owner continues the payments.
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