No-one likes the shock of receiving a hefty repair bill – and these days the costs can be astronomical because cars are so complicated that many tasks are way beyond the skill level of most owners and must to be left to the experts. Many repairs involve replacing whole units rather than the part in question.
This can result in eye-watering repair bills when you combine the costs of the parts required and labour costs of the qualified mechanic at your garage tasked with fitting them to your pride and joy. However, there is a possible solution: an extended car warranty. Effectively this is an insurance policy to cover the cost of repairing mechanical or electrical faults.
It can be purchased either via the manufacturer after the original warranty expires or from an independent extended car warranty company. The nature of these policies varies, but they generally extend the cover by 12 months with an option to extend it further. The benefits are clear: in exchange for paying a set premium you will have the peace of mind that you will be financially protected in the event of a sudden or expensive breakdown.
At their most simplistic, policies will cover basic issues to do with the engine and transmission system. However, warranties can be as comprehensive as you like, with premiums being adjusted accordingly.
So do you need one?
The arguments in favour of warranties are clear but that still doesn't automatically mean you should take one out. There are a whole host of issues you must think about before starting your search otherwise you may be buying something that's totally unsuitable. First you must consider you car's value and the cost of average repair bills for that particular marquee. Some key jobs for example may be particularly expensive due to the design of certain cars or the prices charged by manufacturers for various parts. If you own a vehicle likely to suffer expensive breakdowns such as a performance car then it becomes an increasing incentive to take out a policy to extend the warranty.
You should also think about your car. How likely is it to breakdown? Of course this is impossible to answer accurately but a car that's been driven hard for thousands of miles may have more issues than one which has had a far easier life. Have you got a spare cash in the bank? You may decide to gamble by not taking out a policy and covering the cost of any subsequent repair bills with your savings. These rainy day funds will also be earning interest for as long as they are not needed.
Finding out what’s available
You will need to do your homework to establish what types of warranties are available for your car and particular needs. Obviously the cost will be an influential factor. If, for example, the warranty costs more than the car is worth then it's hardly going to be worth taking out. The best advice is to shop around. Find out, who other people have used, talk to independent garages that can give you an inside track, and establish the experiences of people that have made claims in the past. Premiums will be based on variety of factors, including the type of car, the size of the engine, and how many miles you travel in an average year as well as the level of coverage.
You will also need to check the small print and any terms and conditions carefully so you understand exactly what is covered by the policy and what is excluded especially if you have a sports or prestige vehicle. Some warranty providers, for example, will only pay a capped sum towards the repairs.
Does the warranty company follow the Association of British Insurer's (ABI) "Voluntary Good Practice Guide for Extended Warranties"? Ask if the warranty is insured, giving you rights to the Financial Ombudsman Service in the event of a dispute? An uninsured policy will not give you any of these rights and you are at the mercy of the warranty provider. An important point to check with any financial service including warranties is, are they FCA regulated?
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