Press Office: Warranty Extender
In a cash strapped economy, almost all South African’s are feeling the pinch. Hardly a day goes by without some kind of a price increase – be it municipal rates or the petrol price. We all feel it and it means that we have to make do with what we have and forget about the luxuries, such as DSTV and eating out. It quite often means that to make our budgets work we need to keep driving our car for longer than we would have liked, because cars are big ticket items and the cost of replacement can be prohibitive, be it a new or used. And no, there is nothing wrong with buying a used car so long as it has a full service history and is accident free. Never buy a car that has been in an accident – cars inherently can be problematic – no need to add salt to the wound!
If you are able to buy a used car from a brand dealership, and they are able to extend the original manufacturer’s warranty, then that is most likely a very sound purchase and will give you the assurance to venture out into the great unknown with confidence in your car. Sometimes though, you see a car that you feel is right one for you and you want to purchase it used from a private person but it might not have a warranty – then you should know that you can purchase an extended warranty in your private capacity and pay for it monthly.
Monthly Plans vs Term Plans
Typically when you buy a used car from a dealership, they often offer you a warranty from a third party vendor such as Motorite. Motorite has been in the warranty and service plan game for decades and have a track record to back their offering, so no problem there. Say for example you finance your used car purchase, and you opt to have the warranty plan purchased as a lump sum. Let’s use the example of R10,000 for 2 years cover. All good, and for the reasonable price of R416 per month you are now covered against all mechanical and electrical failures as specified in your plan. This would be called a Term Plan – where you are covered for the 24 month term. There is however a rub – more on this pitfall down below…
The other option would be taking a Monthly Plan directly from Warranty Extender – where you pay for your cover every month and when you decide that you no longer want to be covered, you simply cancel the plan. Your monthly plan does however cover you for a less amount but you have the benefit of extending beyond your 24 month term so long as your car meets the criteria of a warranty – usually 250,000km or 15 years. The benefit of this monthly plan is you can purchase it for a car that you already own that has just gone out of manufacturer’s warranty, or if your Term Plan has expired and you don’t wish to fork out an additional R10,000 for an extension.
Another often not considered benefit of a monthly plan is that when you take a Term Plan and you have it financed – you are paying interest on that plan. You will effectively be paying a 24 Month Plan off over 6 years – which works out to be a pretty poor financial decision for someone who is tightening their belt! Let’s use a car finance calculator to do the maths:
R10,000 plan paid off as part of a 5 year (60 month) finance deal @ 12% interest will cost you an additional R222 p/m.
R222 x 60 Months = R13,320* total cost.
But you are only covered for 24 months, so you need to divide this cost into those months to see what you are paying monthly.
R13320 / 24 = R555
*Compound Interest and Admin fees not considered.
Therefore your Warranty Term Plan is actually costing you R555 per month! A considerable sum more than what you would have been paying if you had opted for a Monthly Extended Warranty Plan. You could either take the saving, or opt to take a plan that offers greater amounts of cover.
Comparing apples with apples can be difficult, as the cost of a useful warranty for a Hyundai i20 or Toyota Yaris is obviously going to very different from a BMW 320i. If you want a real world scenario of why the Manufacturers’ Motor Plan and Warranty is very hard to beat, take a look at this example of a BMW M3 than needs to have its brakes pads and discs replaced. An absolutely staggering amount of money for a performance sedan, and no doubt the reason why an out of plan performance BMW, Audi or Mercedes can be picked up for well below the average depreciation price. This is probably a poor example anyway as those are considered Wear & Tear Items and would never be covered under Warranty but would fall under BMW’s Motorplan – which is similar to a Maintenance Plan.
Porsche has something similar, where you pay an annual set fee and then Service and Parts are done under the plan, with zero additional charge. But you have to have purchased the car through Porsche Centre and you pay an annual R50,000 for this plan for a Porsche Cayenne – which is hardly everyone’s car! More likely the cost of that plan over 2 years and what some people might consider a reasonable budget for a small everyday car. That would be more realistic!
Sadly Porsche-like scenarios are very far from most South Africans reality and the average person with the regular daily driver just wants to have adequate protection for a vehicle that no longer meets the original manufacturer’s warranty. Some manufactures warranties, such as VW are good for 3 years, while others put a great deal of faith in their product and offer you 7 years, such as Hyundai. But the norm seems to be 5 years or 100,000kms – which is fair if you only drive 20,000 kms per year. But when those plans have lapsed and you feel a little vulnerable, it’s good to know you have options.
For an affordable range of quality extended car warranty and service plans for your daily driver, please visit warrantyextender.co.za