Good inflation beaters
IF YOU BOUGHT a car three years ago with a five-year, 100 000km maintenance plan chances are you’re delighted as nobody back then could have foreseen inflation at the levels we’re now experiencing. Though people in the motor industry regard maintenance plans as exceptional value they have a poor reputation in some quarters – due to a lack of transparency.
Gary McCraw, a director at the Retail Motor Industry, says consumers seldom look at what they’re buying while dealers seldom bother to explain what the plan contains. Terminology is also a problem. People seldom understand the difference between a warranty, extended warranty, vehicle maintenance plan and a service plan.
He recommends motorists opt for the vehicle maintenance plan, as it covers more faults, while a service plan often just covers the labour and common features of a minor service, such as the oil change.
“People need to study the content of the plan they’re buying and compare it to their expected usage. A person who does low kilometreage would enjoy as much as six year’s expense-free driving from a sixyear, 100 000km vehicle maintenance plan, whereas a high usage sales rep might blow his three-year 60 000km plan in 18 months,” says McCraw.
Why people often don’t look at that – and later feel aggrieved – it is the nature of the deal. “Buying a vehicle is an emotional purchase, because your car is often viewed as an extension of you, or a fashion statement. People forget a car is a depreciating asset and a costly one to maintain. Looking at documentation such as maintenance plans becomes very much of secondary importance,” says McCraw.
However, he says maintenance plans offered by manufacturers are good value, whether you read the fine print or not. In fact, most manufacturers are reluctant to sell a vehicle without a plan, as they feel it may degrade their brand. No vehicle manufacturer wants to see one of its models stuck by the roadside because the buyer was too stingy to choose a maintenance plan.
A maintenance plan has another laudable by-product: it encourages motorists to have their vehicles serviced on time, thereby keeping the warranty in force, and ensuring any possible defects in the car are addressed in advance.
McCraw recommends motorists exercise more care when buying a “bolt-on” maintenance plan or extended warranty – but even here he says there are few he’d hesitate to recommend. “But they do differ and motorists need to be aware of what they’re buying to avoid later disappointment.” The cost also varies from plan to plan and vehicle to vehicle, making comparisons difficult.
Nikki Myburgh, head of insurance at WesBank says that bolt-ons are becoming more popular as buyers are allowed under SA’s National Credit Act to pay off car loans over longer periods than 60 months. As that extends longer than most maintenance plans, buyers want to extend the period they’ve covered to coincide with their car loan.”
“When choosing a maintenance plan you’d ideally want to choose a recognised name and also carefully review the terms of the contract – and specifically be aware of any exclusions. The terms are fairly standard and uniform among the reputable firms but beware of others.”
The most common maintenance plan independent suppliers are: Motor-rite, Innovation Group, SA Warranties and Warranty Solutions. Dealer groups that provide plans include Unitrans and McCarthy’s. Such plans are typically negotiated at the time of buying and financed as part of the loan. The plans often include additional services such as roadside assistance, medical assistance, legal and map assistance.
Myburgh suggests if it appears the buyer will exceed the kilometreage offered on a maintenance plan it can be topped up, though that should be read carefully, as there can be restrictions. It may be that you have to apply within the first year of the plan.
“In my opinion, because the main administrators all have good relationships with the dealer networks and workshops, and negotiate special deals, it’s both convenient and value-for-money for the motorist. It’s like having a savings plan for car maintenance. You’re paying today for future costs and the inflationary aspect is taken care of by investing the capital for the duration of the plan,” says Myburgh.
She claims service providers don’t provide the service as a moneymaking offering but simply to improve their service to clients. “It’s run at a 100% loss ratio – meaning the cost of the product is exactly the same as the anticipated cost of maintenance.
“It’s a value-add for the consumer. We know the vehicle is fully maintained throughout the term of the loan and the value of the vehicle is therefore significantly higher at the end of the agreement than if there had been no plan. It also has the advantage that the plan can be sold with the vehicle.”
It’s a value-add for the consumer. Nikki Myburgh