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Buyer beware: used car warranties are not what they seem

Buyer beware: used car warranties are not what they seem
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A used car warranty, even though not mandatory by law like car insurance, can help you cover the costs of repairing or replacing some faulty components of your car.

But these warranties aren’t always what they are cracked up to be and sometimes might not even be necessary. Here’s some useful information to help you decide whether it’s worth buying a used car warranty.

What is a used car warranty?

Typically, all new cars come with a manufacturer’s warranty that can last anywhere between three and seven years.

When it comes to used cars, there are three main types of warranties you can buy:

  1. Car manufacturer’s extended warranty – you can purchase this before the original warranty runs out (some manufacturers might also offer an extended warranty for older cars whose original warranty has already run out).
  2. Dealer backed warranty – normally offered when you are buying a car from a big franchised car dealer.
  3. Third party warranty – normally offered by independent car dealers.

Before you choose, it’s worth shopping around to explore all of the available options, their costs and their terms and conditions.

What does a used car warranty cover?

A few of the things that a typical used car warranty might cover include:

  • Engine and transmission
  • Gear box
  • Steering
  • Suspension
  • Fuel systems
  • Air conditioning and cooling systems

As a rule of thumb, most policies will not cover wear and tear items (like tyres and brake pads) and cosmetic repairs such as paintwork.

What is covered varies from one provider to the next and from one policy to another. So check the fine print to see the exact protection a particular warranty gives you.

How much does a used car warranty cost?

The cost of a car warranty will depend on:

  • Value of the car
  • Age of the car
  • Mileage
  • Required level of coverage

Generally, the greater the car’s value, the higher its mileage or the older it is, the pricier the premiums.

Regarding coverage, most providers offer tiered plans that range from basic (for simple mechanical breakdowns) to comprehensive coverage.

You might be able to keep the costs down by going for a more basic package. But if you take this option, it’s best to have an emergency fund or some savings behind you, since any costs not covered by your warranty will have to be paid for out of your pocket.

Should you buy a warranty?

There’s no question that a good warranty can be extremely helpful, especially for a used car. After all, used cars are more likely to require repairs due to ageing or improper maintenance by previous owners.

But good warranties don’t come cheap and they might just not be worth the expense.

To gauge whether a used car warranty is worth buying, it could be useful to perform a cost comparison of the warranty and common repairs. You may be surprised to find out that paying for repairs yourself is actually cheaper than taking out a warranty.

Some warranties come with so many conditions that it’s difficult to work out exactly what they include. This can set you up nicely for a rude awakening when making a claim.

Remember that even without a warranty, you may still have some protection. For example, if you bought the car with a credit card, you’ll be covered by section 75 of the Consumer Credit Act. Under this law, you can claim your money back if you find major defects with the car after buying.

What should you check for before taking out a used car warranty?

If you decide to buy a used car warranty, here are 10 useful questions to ask your provider to help you check exactly what you’ll be paying for:

  1. Is there a limit to the amount of repair costs you can claim?
  2. Is there a mileage limit?
  3. Does the warranty cover the full repair costs and not just labour or parts?
  4. Is there a limit to the labour costs you can claim for?
  5. Is there an excess with the warranty? If so, what’s the amount?
  6. What garages have been approved for servicing and repair? What are the implications of using a different garage?
  7. Is the warranty provider regulated by an official body such as the FCA or registered with the Association of British Insurers (ABI)?
  8. Is there a standard 14-day cooling off period if you change your mind?
  9. What’s the stipulated servicing schedule like?
  10. Is there a time limit on when you can make your claim?

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