For many consumers, particularly first-time car buyers, understanding these options can be confusing, and stressful. Many buyers also don’t know what their rights are and whether these products are optional or mandatory.
AA Warranties managing director David Chard said: “When buying a vehicle, it’s important customers understand what they’re getting into and appreciate all the costs they are signing for.
“Having knowledge of the add-on plans is as important as ensuring the vehicle meets all their needs, so being informed about the different options will help them make better decisions.”
Critical information regarding service and maintenance plans is to understand they have limited lifespans when bought with a new vehicle. They remain “active” until the car has a specified mileage or is of a specific age. This is spelt out when the vehicle is bought.
A service plan covers the costs of regular scheduled services, determined by the manufacturer. Items covered are marked by an “R” (for replacement) at service intervals. Buyers must check with the dealer or consult the vehicle’s handbook to find out when these intervals are. Importantly, a service plan does not cover wear and tear on a vehicle, nor does it cover mechanical breakdown.
“A service plan is, essentially, regarded as a budgeting tool. It can be bought upfront as a term product or purchased as an on-going monthly payment. Either way, it covers the prescribed services for a specific duration of time or kilometres, with the premium paid to cover the costs of a service when needed,” says Chard.
A more expensive and comprehensive plan is the maintenance plan, which covers all routine servicing (again, according to the manufacturer’s schedule), as well as cover for mechanical failures, and wear and tear. Many maintenance plans are included in manufacturer’s new car sales but these can also be bought separately.
“While these plans have an initial limited lifespan, they can be lengthened through purchasing extensions or follow-on maintenance plans.”
Warranties are further distinguished from both service and maintenance plans. A mechanical warranty will cover mechanical failures or breakdown of parts, but will typically not cover scheduled services or wear and tear. They cover the risk of parts failing. Like the other products, they are often included by the manufacturer on new cars, but can be extended or replaced with another equivalent once their initial term has expired.