You’ve bought a new car or home appliance and, just when you thought the sale was concluded, the salesperson says: ‘Can I offer you an extended warranty on that?’ Wait … what? Think before you sign. You may not need an extended warranty. Neesa Moodley rep
Do you need them? The answer varies, depending on what you have bought and the age of the item you have bought. For example, if you are buying a new car, it already comes with a free service plan for the first three to five years. A new car also typically comes with a manufacturer’s warranty. For example, both Subaru and Hyundai now offer five-year warranties on new cars. This should cover any manufacturing defects, mechanical or electrical, for a certain period after the purchase date of your vehicle.
Warranties may differ from one manufacturer to another, but on average the warranty for a car is usually for three to five years, or for a specific kilometre distance. Warranties usually cover repair costs to parts such as the gearbox, water-cooling system or head gasket, and other large parts in the engine.
You can buy an “extended warranty” when you buy a new car. This means that you are in effect buying extended cover for a longer period, so after five years, when the original warranty expires, you will continue to enjoy the benefits of a warranty for a further two to three years. But consider the following:
You might not keep the car for a full eight years. Most consumers, South Africans in particular, change their cars every three to five years, so you are unlikely to need the extended warranty.
When you trade in the car or sell it privately, you are unlikely to recover the cost you laid out for the extended warranty.
If you did choose to keep the car for longer than five years, there is nothing to stop you from buying an extended warranty five years after you initially bought the car.
An extended warranty can cost anything from R3 500 for a basic warranty to R8 500. If you buy this product when you are buying a new car, it’s likely that you are buying the car using a hire purchase agreement with a bank, and the cost will be added to the total loan value. So, in effect, you are now going to be charged interest over the next five years for a product you will only need in five years’ time.
An extended warranty might make more sense if you are buying a three- or five-year-old car, which is no longer covered by the manufacturer’s warranty. Ideally, if you do buy an extended warranty, you should have factored this into the cost when you were saving for the deposit on your car.
This means you can pay the cost of the warranty upfront in cash and you can avoid paying interest, which you would be liable for if you added the cost of the warranty to your hire purchase agreement.
You could also just save the “premium” you would have paid each month for an extended warranty and use your savings for the maintenance costs of your car.
Bear in mind that by the time you face additional repair costs and your original manufacturer’s warranty has expired, you are likely to have finished paying for your car or you’ll at least be quite close to the end of your loan agreement.
Extended warranties on appliances
When it comes to appliances, it helps to do your homework. Find out what the manufacturer’s reputation is for after-sales service. You can do this by checking customer service sites such as hellopeter.com.
Businesses are rated out of 10 and are judged on criteria such as the number of reviews received, the sentiment expressed by consumers, the company’s response time and the number of conversions (where an unhappy customer becomes a satisfied customer).
You should also bear in mind that most things covered by an “extended warranty”, such as accidental breakage, would already be covered by your household contents insurance policy.
In addition, by the time you require “extended warranty cover”, you might actually be better off simply replacing the appliance – the replacement cost might be cheaper than the cost of the extended warranty.