Extended warranties: good deal or scam?

The stress and unexpected expense of a breakdown can be hard to cope with.
The stress and unexpected expense of a breakdown can be hard to cope with.

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The cost of keeping a car on the road is soaring.

It’s not just the cost of fuel, insurance, and servicing that is putting the strain on our finances, the last thing any motorist needs is coping with the unexpected expense and stress of a breakdown.

Most manufacturer warranties phase out after three years, but as a car gets older the chances of something going wrong increase dramatically.

Step in the car extended warranty companies.

If you feel compelled to buy peace of mind you can invest in an insurance policy that will take care of your exposure to large repair bills.

But with extended car warranties dressed up to look like the best thing since sliced bread, there must be a catch.

Unless you are able to fork out a substantial sum for warranty protection, most policies will not give you complete cover. If you’re thinking of investing in a car warranty it’s essential not to be rushed into a decision, but to take your time to look over the small print.

Here are some of the questions you need to ask:

· What is the claims limit?

If you’ve got a fairly new or upmarket car you could still find yourself dipping deep into your pocket if you make a claim. A warranty limit of £500 or less will not cover you for expensive engine or transmission repairs. Top end warranty companies will set cover at around £5,000 or the replacement cost of your car.

· Does the warranty cover parts that fail because of wear and tear?

The cause of most dissatisfaction with many warranties, ‘small print’ exclusions will eliminate any wear and tear repairs, right down to replacement hoses. If a part fails it’s most likely to be due to high mileage or age, so expect to get what you pay for.

Cars over seven years old with a high mileage are rarely worth insuring, unless you’ve sheds of money to throw at a comprehensive warranty. In that case paying for repairs as you go is likely to be a far more sensible option.

· Is there a limit set on garage labour rates?

Check to make sure the policy will cover the cost of your garage labour rates (including VAT). If there is a cap on your chosen garage costs, you’ll have to fork out the difference.

· Does the warranty cover failed components which have been discovered during routine servicing or an MoT failure?

A top car warranty will cover failures to insured parts that come to light at a service interval or an MoT test. As cars get more reliable, service intervals have been extended, so beware of warranties that exclude failed parts that come to light at service intervals or MoT inspections.

· Is the warranty underwritten by a recognised insurer?

If not you can kiss your premium goodbye if the warranty company goes into administration or bust.

· Does the warranty tie you down to specific garages for repairs?

Some warranties require you to take your car to a specific garage for repair work. The garage may be miles away and inconvenient to get to, and their charges may not be competitive. Beware.

· Is there a mileage or age limit?

Check if there’s an annual or total mileage limit above which the warranty won’t pay for repairs. If your car is getting near any maximum age allowed it’ll not be worth buying a warranty.

· Where can I find out more about car warranties?

Most franchised dealers will sell you an extension your car warranty or you can buy from independent providers. Google ‘car warranties’ to find out what’s on offer and policy terms and conditions.