So what is a warranty worth for a used car?
Q: I’ve just bought a car with a used-car warranty. Are they any
good?
It depends on the type of warranty offered, who’s offering and
the car it’s applied to. As a rule of thumb, if you’re expecting a
used-car warranty to offer anything approaching the level of
protection of a new-car warranty, you are in for something of a
shock.
Q: What’s the problem?
Most of them, even those offered by franchised dealers in
“approved used” schemes, do not come with a guarantee from
the manufacturer. They are insurance policies against
mechanical failure and, like all insurance policies, cover is
limited and comes with a list of exclusions and conditions.
Q: For example?
They vary hugely. Some will not even cover the drivetrain of the
car which, put simply, is everything involved in the production
and transmission of power from the engine to the gearbox.
Many exclude any item where wear and tear is a possible
contributing factor and all require you to follow the terms and
conditions to the letter.
Q: How can I make sure the used-car warranty I’m being offered is
worth it?
It’s difficult, particularly if you’re not mechanically minded
and have an aversion to small print. An aptitude for the niceties
of the legal system helps too. However, the automotive issue of
Consumers Reports covers this matter in detail.
It comes out every April and should be read by everyone who owns a car.
Q: What’s the most important thing to consider in looking at
warranties?
Prevention is better than cure and you will always be best
served by buying a reliable car in the first place.
Q: But what’s all the fuss about. Aren’t most of these warranties
thrown in free of charge anyway?
They may not have a specific list price but don’t believe for a
moment that they are free. Something for nothing is not a
phrase that rings any bells with second-hand car dealers, and if
you’re being offered a warranty, you are not only going to pay
for it, the dealer will take a healthy profit too. Take the
example of a 1997 VW Passat advertised at a franchised dealer
for $11,999. The garage would have paid about $ 8900 at auction,
yet the chief features of VW’s approved used scheme
(full mechanical and history check, warranty and a year’s
membership of a road side assistant organisation) amount to less than $550.
So even if you managed to persuade the dealer to knock $500 off his
advertised price, it’s not difficult to see the profit he’ll still be making
on the car, even after the warranty has been paid for.
Q: So are they a waste of time and money?
What price your peace of mind? Approved used policies from
companies such as BMW, Lexus, Saab, Toyota, and
Volvo tend to be almost as good as those offered on new cars,
but they can afford to be: these marques are not known for
stranding their customers at the roadside. The least
comprehensive and most expensive warranties usually with deductibles
— from Chevrolet, Ford and Chrysler tend to belong to those manufacturers
with less glowing reliability records.
Q: So am I better off buying warranty privately?
Financially, almost certainly. Mechanical Breakdown Insurance
policies can be bought for around $200, while a complete mechanical
and history check costs around the same.
Membership of motoring organisations varies according to
coverage. Add this to the saving you’ll make buying privately rather
than through a dealer and clearly you’ll be better off, at least in the
short term. However, many find the peace of mind and lack of hassle
in receiving all of this from a franchised dealer a compelling argument.
Remember also that the price of warranty insurance will vary
hugely according to the age, mileage and type of car.
