card guide
What Is A Warranty?

Second hand or first time round

When you buy a used car from a dealer you will nearly always get offered at least three months warranty. If you are buying from new then you will get about three years warranty as standard. But what is it and what’s it got to do with insurance?

Showing off

Hyundai, are providing a five year warranty on all their models since September 2002, as such they are breaking the mould in the automobile industry. Up to that time most car warranties had been for three years. By giving a five year warranty Hyundai are saying their cars are built so well that they don’t expect major mechanical failure within that period. By implication they are saying that build quality will last for the life of the car.

To understand that marketing angle you have to understand two things: firstly that warranties are a form of insurance against something going wrong and secondly that the insurance industry, (the warranty company), bases its risk assessment on the history of mechanical failure in the past. So by implication we are to assume Hyundai are built to last.

A full marketing analysis could run to many pages, but suffice it to say that it’s a very clever marketing angle by a company that had hitherto had an unspoken reputation for less that perfect mechanical longevity.

Covering your parts

A warranty will cover all the major mechanical parts of an engine and sometimes other aspects of the car’s structure such as the clutch and brakes. It won’t cover wear and tear and so they will have a time and or mileage limit after which the warranty no longer applies.

When you are buying a used car you can opt to pay a little more for an extended warranty, these are often provided by motoring organisations like the RAC. Effectively when you pay your money for that extension you are paying a premium to the insurance company in case the engine (or whatever) fails.

A warranty can be a great source of reassurance to a nervous buyer in exactly the same way as any insurance policy can reassure somebody. What it means is that if anything does go wrong the customer won’t have to dig deep into their pockets to fund the repair: they have already paid somebody to take care of it.

Servicing

Warranties vary as to their exact conditions and what they cover, but it is usual for the customer to pay all servicing costs. The warranties really are there to cover the mechanical failure of parts.

Servicing of vehicles over three years old is usually done in garage premises that are not franchised members of a large network. Sometimes it appears as though warranties stipulate the servicing has to be done in the garage or in a premises associated to the dealer where the car was purchased, however, in a report from the Office of Fair Trading in 2003 they expressed their concern that many customers were confused by the conditions of warranties and that few actually did specify use of a particular dealership for servicing.

Car Insurance

In a way, a warranty is a type of car insurance, although it shouldn’t be confused with motor insurance taken out for you as a driver!

The great thing about warranties, and it will be interesting to see how the Hyundai fairs with this, is that the warranty can be passed on to the new owner when a car is sold within the warranty period.

As far as the Hyundai is concerned it should make the used cars more expensive, but will it make them too expensive for the second hand car market and back fire on the great marketing minds at the manufacturer? Time will tell.

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Posted on: [ November 03, 2017 ]       Add to Del.icio.us   Digg it   Add to Blinklist   Add to FUrl   StumbleUpon