Buying an Extended Warranty on a Used Car
When buying a used car warranty, the most important rule is to know exactly what is covered by the warranty. Be sure to read the small print, because warranties can vary widely.
There are typically two main types of cover, a basic one for mechanical breakdown or comprehensive. Just about every used car warranty will cover major mechanical parts such as the engine, gearbox, suspension, ignition, electrical system and steering. Parts that fail because of wear and tear are often excluded, however, as is damage to bodywork, paint, glass and lights. Sometimes even oil leaks are excluded.
Ensure that any excess charges on the warranty are low, ideally no more than £25, and watch out for percentage excess clauses, which increase the amount payable as mileage increases. Check how much each individual claim is limited to. The best used car warranties allow you to claim up to the value of the car, but many have an inadequate claim limit of only a few hundred pounds. At least make sure the cover matches the likely costs of repair, which could be thousands of pounds.
Repair CostsOften a used car warranty will have a limit on the hourly rate for repairs, so if you use a more expensive garage, you will pay the extra. Ensure the warranty allows you take your car to the garage of your choice. Check too if the warranty stipulates a limit on annual or total mileage or the maximum age of the car.
Try to avoid used car warranties with either consequential loss or betterment clauses. Consequential loss is an exclusion where a covered part is damaged because of the failure of another part which is not covered by the warranty. Betterment is when a repair increases a car’s value and you have to pay part of the cost.
Most used car warranties exclude wear and tear on parts such as tyres, brake pads, exhausts, clutch friction plates, hoses and catalysts, because otherwise claims could be almost limitless. The very best warranties will offer some wear and tear cover, although some parts may not be covered and you may have to pay toward the cost of parts.
Additional BenefitsSome used car warranties will offer additional benefits such as breakdown cover, replacement car hire, MoT insurance cover or cover in Europe, but most will insist the car is serviced according to the manufacturer’s schedule. Any pre-existing faults will be excluded and the warranty will be invalidated if non-standard parts are fitted.
A franchised dealer is the most obvious place to buy a used car warranty. By extending the cover as a car comes out of its manufacturer’s warranty, you can effectively continue the same warranty cover you are used to. Check the terms carefully, however, as each manufacturer’s warranty is different. An alternative is to buy cover from an independent provider. This may provide a cheaper option, but be aware that schemes offered by certain breakdown recovery providers for repair costs only apply at the time of the breakdown and so are not full warranties.
A used car warranty may not save money in the long term, but can offer peace of mind and may help sell a car. It is usually possible to transfer a warranty’s balance to a new owner, although there may be an administration charge of between £10 and £50 for doing so. No used car warranty providers are obliged to give a refund on the policy should you sell the car, however, and the resale value may not reflect the full price of the cover you purchased.