According to Wikipedia and many other sources, “Road transport is an essential element of the Australian transport network [resulting in the fact that] Australia has the second highest level of car ownership in the world.” Australian car prices are lower today than they have been for several decades.
Even so, purchasing a vehicle is an important decision for any Australian to make and it should be treated with care. There are many factors to consider, including whether, or not to, buy an extended warranty for the vehicle.
What is an extended warranty?
“An extended warranty is a prolonged warranty offered to consumers in addition to the standard warranty that comes with all new cars.” Extended warranty insurance provides an additional layer of protection beyond the original manufacturer’s warranty.
There is a range of extended warranty products available for you to choose from when you buy a car. Some products give you the option of extending your car’s original manufacturer’s warranty; while, others give limited cover of your vehicle’s major components for an extended period of time / mileage.
Why consider an extended warranty?
An extended warranty extends the manufacturer’s original warranty. The continual motion of the mechanical parts of a car, such as an engine, transmission, and electrical panel wear out, and they are very costly to replace. By purchasing an extended warranty, you will not have to fork out large sums of money from any unexpected repair costs that may arise after the initial purchase of your vehicle.
What do I need to know before buying an extended warranty?
There are several important factors to consider before making a decision about what type of extended warranty you need to purchase:
- The manufacturer’s new car warranty needs to expire before the extended warranty kicks in.
- Your vehicle’s components will only start wearing out and giving problems a few years after the purchase date. Our data shows that most modern cars remain trouble-free for a few years after the expiration of the original manufacturer’s warranty.
- Extended warranties only offer limited cover for certain mechanical parts. Some products have long lists of components that are excluded from the cover. It is important to make sure you understand what is included and what is excluded from the cover. Research is starting to show that a transmission or engine failure is no longer likely. These components are now more reliable than ever. However, the computer controls in modern cars are not so reliable. A single failed ‘Control Computer’ can cost $ ’000’s to replace.
- Manufacturers sometimes cover out-of-warranty items. If a product breaks down in an unreasonably short time or if there’s a known problem affecting many customers, manufacturers may extend ‘Good Will’ help by replacing the item free or at a reduced cost. Please note – Manufacturers only consider this ‘good will’ gesture on a case by case basis and in very limited circumstances.
- Your credit card may cover repairs to your car for a limited period of time Some credit cards automatically extend the manufacturer’s warranty up to a year on many products, including cars, that are purchased solely using the credit card.
- Make sure you don’t have duplicate cover with more than one insurance policy. Some household insurance plans might cover the same components as your extended warranty does.
- Read the fine print – all extended warranties typically have many exceptions that can be found at the end of the policy document. Make sure you understand the exceptions otherwise the provider will use these exceptions to deny your claim.
- Your investment is protected when purchasing an extended warranty. It will give you peace of mind knowing that your car is covered for a wide range of mechanical and electrical faults with little or no excess to be paid.
- There are always options to pay for high or low mileage cover If you don’t drive many kilometers per year, then it is best to go for a low mileage cover, and vice versa.
- Most extended warranty plans offer the options of making a single upfront payment or of paying the cost of the warranty in easy monthly instalments.
- Win-win if you decide to sell. Receive a pro-rata refund for your remaining cover, or sell privately with a transferable warranty – and great resale value.
- Rely on roadside assist. Select optional roadside assistance with your extended warranty for everyday certainty.
There is a lot to consider when deciding on whether to take out an extended warranty insurance for your car. It is important to ask questions, verify the options available to you and make sure that the cost you pay is reasonable for the level of protection you need for your new car.
Tip: It’s important to fully read and understand the terms of extended warranty coverage – ESPECIALLY what is NOT COVERED to ensure value for money, and confirm any queries in writing.