Aftermarket car repair warranties are now a popular buy
Repair of commercial cars in Soweto in December 2006. (Per-Anders Pettersson)
- Aftermarket auto repair warranties are increasingly popular.
- In theory, they can help offset the cost of major repairs to new, new and used cars.
- But most come with terms and conditions – and some will only pay for a portion of major repairs.
- Here’s what to look out for if you’re looking for an extended warranty or a used car.
- For more stories go to www.BusinessInsider.co.za.
The world of auto warranties, maintenance plans, and maintenance plans is confusing, especially when it comes to used vehicles.
Until fairly recently, these repair safety nets were mainly available for new and relatively new vehicles. Depending on the category the plan fell into, it typically lasted a few months, a few years, or a few hundred thousand miles.
New car dealers have used warranties, limited service and maintenance plans, and possible extensions to them, as added value or upselling. But when they expired and the option to extend was no longer available, car owners largely had to pay the bills for future repairs themselves.
But these days, aftermarket repair warranties and third-party extensions are becoming an increasingly popular way to reduce the burden of major auto 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 automotive, insurance and financial services industries are now entering this market – from the country’s largest banks to niche aftermarket guarantee companies.
As with insurance policies, however, these come with dense terms and conditions – you’ll get a reading of around 4,000 words per policy. Not all policies are created equal, and in most cases, you get what you pay for.
Most aftermarket warranties don’t cover the cost of routine service or normal 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 of a certain value.
Coverage is not only limited to vehicles with an expiring manufacturer’s warranty – it is also possible to purchase a used warranty for older cars, but most policies exclude very old vehicles.
For this reason, comparing all of the secondary market warranties currently on the market is complex, but there are several factors worth considering before committing to a single business.
Most of the companies selling aftermarket auto warranties use the quotation opportunity to extract your data, especially if they are looking for a similar price. At best, they ask you to part with a phone number and email address before offering a rough quote. At worst, some simply collect your data and promise that an agent will call you back.
Aside from data mining and upselling opportunities, that’s because premiums for aftermarket warranties depend on the type and age of the vehicle covered and the type of coverage you’re looking for.
Naturally, an old or rare car is likely to attract higher monthly payments. And like insurance, certain risk factors like the age of the driver can also increase premiums – or void coverage altogether.
Costs also depend on the extent of coverage – the Automobile Association, for example, offers at least seven different options ranging from “Chrome” to “Titanium” with coverage limits between R7,000 and R100,000.
Secondary market guarantees do not represent a significant monthly expense. At the bottom of the scale, you can expect to pay around 100 Rand per month, while premium packages cost up to 500 Rand per month, depending on what you drive, extend a warranty, or take out one. on a used vehicle, and exactly what coverage you get.
Some policies require policyholders to wait at least three months before making a claim – presumably to reduce the risk that someone will purchase a policy for an existing problem.
Most aftermarket warranty providers will require your vehicle to have a full service history. This is true whether you are extending a warranty on a relatively new car or purchasing a new policy for a used vehicle. Some providers will waive this requirement if you pick up your car for service within one month of signing up.
What they cover
There is no standard list of what secondary market warranties will cover, but most companies specify exactly what is included and excluded in their terms and conditions.
A deep dive in these conditions is crucial before registering. Although most marketing materials casually promise “parts, repairs and labor” coverage, asterisks almost always lead to a complete list of parts, repairs, and labor they will not cover.
In general, warranty coverage is limited to electrical and mechanical failures. This means that while some policies may cover the cost of breaking down things like air conditioners and brake systems, they likely won’t pay for consumables like air conditioner regasing or brake pads.
Most companies will only pay 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 Rand 3,000 for its repair. Engine repairs for the same model are usually capped at 6,000 R.
More expensive plans on newer vehicles will likely pay more – it is possible, for example, to receive coverage of up to R20,000 for an engine problem with a premium warranty.
All costs beyond these will have to come out of your pocket.
Original or generic parts
When parts are covered and need to be replaced, some companies will only use genuine parts from the manufacturer. Others may opt only for generic parts. If the original parts are important to you, it may be helpful to clarify this with the company before accepting coverage.
It should also be borne in mind that genuine parts are generally more expensive and may consume your coverage amount faster than generic parts.
As with parts, all repairs offered by warranty extensions will not be made by the original manufacturer. Some companies may require applicants to use a specific mechanic or franchise.
You can expect to receive add-ons to entice you to register with specific companies. These typically include a combination of breakdown, towing, emergency medical response, and car rental services – but given the number of companies offering similar services as part of their policies, these may be superfluous.
Sell your car
Most policies are tied to a specific vehicle and can extend over a specific period of years or kilometers. This could be a problem if you sell your car before the aftermarket warranty expires. But some companies allow you to transfer the policy to the new owner, as long as the premiums are paid and the new owner continues to make payments.