Four hidden costs of a 'free' warranty

Posted by Motorama in Buyer Advice

If you buy a vehicle from a motor dealer in Queensland, it doesn’t matter if it’s new or used – you’ll receive a warranty as part of your contract.

Some dealerships will offer you an extended warranty, but what’s in the fine print?

Not all warranties are created equal. All of them have to cover the basics in case your vehicle fails through no fault of your own, or if your car doesn’t function in the way it was intended when it left the factory.

Sometimes, to sweeten the deal, a dealer will promise a ‘free warranty’ that seems too good to pass up. What you may not realise is that this ‘free’ gesture of goodwill is actually bound to restrictive terms and conditions.

You should always read the fine print to know exactly what you’re signing up for – while you may think it’s worth it for convenience and peace of mind –because when you actually want to make a warranty claim; it could be much more difficult than when you first signed up.

Here’s what to look for, specifically, before you sign up for an extended warranty.

Servicing your car

Extended warranties can restrict you when you come to servicing your vehicle. Some will only cover you if you only go to a specific dealer service centre (regardless of whether it’s convenient for you), while other warranties will make you liable for any excess costs of repairs (i.e. the part will be covered, but you pay for the labour.)

Some will even force you to service your car after a certain amount of time or kilometres so the warranty will stay valid, which can be a hassle if you don’t have the time or money to fit their schedule.

Transferring ownership

Check if there are any restrictions to transfer the warranty, if you pass your car to someone else.

Find out what the processes are to transfer the ownership to the next owner, and if there are any fees associated with changing hands. Some free warranties aren’t wholly transferable, so if you come to sell the car, you’ll lose the benefit of having an extended warranty covering your car.

Claiming interstate

If you are looking at a free extended warranty, it’s worth checking where exactly you can make claims. Some free warranties limit your coverage to your state, or locations that are convenient for their service providers.

For example, if your car is further than 100km from an approved service centre, a free warranty may not honour their claim to provide roadside assistance. Another free warranty might not give you the full benefit of your warranty claim if you’ve re-registered your car in another state.

Benefits under the law

A ‘free warranty’ is essentially a gimmick to entice you into buying a car. Basic consumer law will already cover some of the conditions offered by warranty, so don’t be fooled.

Consumer guarantees can be upheld in certain cases where any product would reasonably be expected to function as intended. So when you’re doing your pre-purchase inspections, if it looks like it’s the car is in good shape – but fails once you’re out on the road with it, then you may be able to claim from the warranty provider, even if they refuse, thanks to consumer protection laws.

Before you sign up to any extended warranty, make sure you read all the terms and conditions and take your time to look over everything, don’t get pressured into signing up to anything that you don’t understand.

If you do end up purchasing an extended warranty, it helps to know where you can service your car and keep it maintained. The expert service technicians at Motorama have over 30,000 vehicles through the workshop every year, so they can handle everything from a logbook service right down to the trickiest repair job.

Motorama also offers a ‘Five Star Warranty’ with every new and used car purchase that covers unlimited claims, 24-hour roadside assistance, towing, accommodation and the flexibility to service your car according to the manufacturers schedule, wherever is most convenient for you.