With the collapse of MG Rover and an admission by the administrators that there are no funds to honour three-year warranties, Daniel Attwood looks at the car warranty market
Buying a new car is the second highest single expense consumers are likely to face. To safeguard their investment, motorists look for a guarantee that what they are buying will not breakdown. And, if the worst should happen, they demand that they're not left footing the bill. Hence the new-car warranty.
Car-makers have steadily increased the length of warranties which guarantee that they will cover the cost of parts and labour in the event of any defect in materials, assembly or manufacture.
In Ireland, two-year warranties are the norm, with three-year and even four-year periods entering the marketplace. In Britain, five-year warranties have been on offer for some time and, in the US 10-year warranties are available. Irish distributors have so far refused to move beyond four years.
Increasing the length of warranties has come about for several reasons, not least that technology is now so advanced that most owners of new cars will never have a problem in the first three years. In addition, because consumers yearn for peace of mind, manufacturers are racing to offer the longest period possible in an effort to convince buyers that their cars are more reliable than their competitors.
Fiat, for instance, announced recently that it would offer new buyers a four-year warranty on its new vehicles. "We wanted to confirm to customers that we are prepared to back our claims of top quality cars," explains Michael Howe, Fiat Ireland's managing director.
But what if the worst happened and another manufacturer followed MG Rover into the sunset? As with MG Rover customers, it will be left to motorists to negotiate with their dealers about who pays for the warranty work. In most cases, dealer would do minor warranty work in the interests of customer service. But failure of an engine or a gearbox may be a different story.
Apart from warranties, all new car buyers are covered by consumer law. Regardless of the manufacturer's standing, the dealer or person who sold the car is responsible for repairing any faults that were there at the time of sale. According to the Office of Consumer Affairs, when a new car is sold it must be fit for its purpose and be as durable as can be expected.
Therefore, if a new car breaks down, it's the dealer's responsibility under the sale of goods legislation to repair it, not the maker of the car.
Warranties supplement consumer legislation and have the added advantage of removing the obligation to prove that the fault was present at the time of purchase - something that as time passes becomes more difficult.
This peace of mind is attractive to many motorists and, as a result, independent warranties are now available as well as those offered by car-makers.
Independent warranties can be taken out by motorists who, for example, have bought "grey imports" or who have a car whose maker's warranty has expired. The services of these companies can also be used by MG Rover customers who are in a situation where, although they have a warranty, payment for any work will not be honoured by the company's administrators.
A leading British independent warranty supplier, Warranty Direct, is already offering special deals for MG Rover owners. Days after the car-maker calling in the administrators, Warranty Direct began offering a discount of 20 per cent for MG Rover customers who wanted warranty cover for up to four years for recently purchased vehicles.
But it's not just buyers of new cars who seek peace of mind. Taking out a warranty after the expiry of the standard maker's cover is often an astute move, says Andrew Francis from Warranty Direct.
"Two out of every five cars suffer mechanical failure in the two years after the traditional three-year manufacturer's warranty has expired," he explains, adding that motorists should shop around for the best extended warranty cover and not simply go back to their dealer, who may not offer the most competitive deal."
According to Warranty Direct, suspension failure accounts for one in four claims for vehicles aged three and four years old, while the second most common problem is engine failure. Both types of faults can prove costly.
Despite this, one Irish provider of independent warranty cover, GE Money, admits that uptake of its extended warranty products is currently low. Marketing director Owen Lynam says that, with a growing number of cars and increasing customer awareness, demand is expected to grow.
"With 160,000 new cars being sold and a further 200,000 used cars changing hands each year, we expect uptake to increase," he says.
With the collapse of MG Rover, GE Money is also offering cover to MG and Rover drivers who want the assurance that if their new cars should breakdown, they will not be liable for the costs.