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Money Refunds.org.uk

FREE Practical Advice and Tips on how to get money back, replacements, credits, compensation and more for poor service and shoddy goods across the UK  

Warranties, Extended Guarantees and Insurance

• Back to Motor Vehicles

When you buy a new car from a dealer you will normally have a 1,2 or even 3 year warranty which covers the vehicle for defects, such a contract is part of the manufacturers obligations to you as the new owner to support the vehicle via the supplying dealer for this initial period.

Buying second hand through franchised and general used car dealers provides a range of opportunities for dealers to make money money on a car sale by selling additional services such as an Extended Guarantee r Warranty. The buyer then takes on additional expense which may have limited real value.

Buyers are advised to review the wiseness of such protection in light of the following pointers, direct refunds later may not be possible.

There are two types of insurance you can take as an optional extra at the time of purchase which can usually be added to any finance agreement as part of the overall deal. Changing your mind later, or cooling off periods may be limited so check these options exist at the time of purchase, not just hope they exist, only to find later you have taken on a extra, high cost long term burden of dubious value.

• GAP Insurance - covers you for the potential loss in value of your vehicle against the monies owned on finance. Normally a low cost single premium insurance it can save you potentially several thousands of pounds, however premiums quoted can vary to make the risk v value unrealistic. Best for high prices vehicles.

•  Extended Warranty - whatever term is used this is a contract of insurance which provides for

  • A fixed period of time usually 1,2 or 3 years but can go to 5.

  • Old vehicles may be limited to 3, 6, 9 or 12 months and may include a renewal option. Certain vehicles by make, age or condition may not be available on warranty at all.

  • Limited to repair or replacement of certain components usually major parts such as the gearbox, clutch, engine etc.

  • The more comprehensive the cover the more expensive the policy

  • Fair wear and tear or new for old. This means normally if a clutch fails after 50,000 miles a reduction in the replacement payout could be made for "fair wear and tear" less so if it failed after 10,000 miles. A new for old policy would replace regardless of mileage.

  • Sudden occurrence - some policies make it clear that the failure of a qualifying part must occur during use, if it fails steadily over a period and you take it to a garage the policy may NOT payout. A roadside failure of a part may often involve a recovery of the vehicle to a garage and many policies include a fixed maximum for this (?50 normal)

  • Some policies cover additionally car hire whilst the vehicle is being repaired (usually limited to 1,2 or more days per claim) or overnight hotel accommodation if you are away from home (1,2 or more nights per claim) , although policy costs may be higher.

Points to watch for

•  Non cancellation - you are prohibited by the contract with both the supplier and the finance company from canceling the policy and getting a refund.

•  Transfer - although most contracts allow the policy to be transferred to another owner, some do not, or involve heavy transfer fees. There is little point in taking a high value long term warranty if you intend to sell the vehicle where the warranty cannot be transferred.

•  Sale to a dealer - some policies automatically cancel the policy if you sell or trade the vehicle to a motor dealer (rather than sell privately), with resulting benefits to the original selling dealer who may well be able to cash in the unexpired insurance term.

•  "New for old" replacement or "fair wear and tear"

•  Sudden, unexpected failure must occur to qualify

•  Extras such as recovery charges, car hire or hotel accommodation

Advice to consider

•  Shop around if considering having a warranty on a used car, cover and costs can vary by hundred of pounds for the same cover.

•  Some dealers include cover for an initial period usually up to a year free, or rather as part of the price for the vehicle.

•  In negotiating a deal you could ask for extra warranty the value to you and the actual cost to the dealer allows a lot of bargaining power..

•  Policies are rarely justified on cheap cars except major components on a new for old basis.

•  Avoid the hard sell - dealers get huge commissions on these sales and can often make more money via commissions (usually paid up front) than on the vehicle sale.

•  Look for transfer and cancellation conditions

•  If you sell the car you may be able to cancel the warranty and get a refund for the unexpired period, or use the transfer element to help sell the vehicle.

•  Canceling the policy may be easier if you bought the vehicle without finance or using a personal loan rather than on a hire purchase agreement which covers the vehicle and warranty insurance as a "package".

• AND finally, Take Time to Consider - you are a long time locked into an expensive, long term vehicle finance package which in reality offers dubious value in claims options.

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