Motor plans: read the fine print

By Georgina Grouth Time of article published Nov 12, 2018

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CAPE TOWN - Do you understand what cover is provided by your motor or service plan? If not, you’re probably one of many who don’t know the details of their policies, or haven’t read the fine print.

Adhered to correctly, maintenance plans assure motorists that their vehicles will be serviced on time, at little cost, which keeps them in optimal condition and preserves the resale value.

New vehicles come standard with a manufacturer’s warranty and out-of-warranty second-hand vehicles are covered for at least six months by the Consumer Protection Act.

Most new vehicles are also covered by a service plan, for a set period or distance, eg, three years or 90000km. These plans cover the replacement of serviceable parts - such as oil, fuel filters and even cambelts.

Then there are maintenance warranties, which cover both services and other maintenance components. Some policies cover only the cost of the parts, not the labour.

Extended warranties, though, are specific to mechanical breakdown claims so if your engine packs up, you are covered.

Not so fast, warns Crystal Slabbert, the co-author of Eff You Very Much: how you are screwed by dealerships and banks when buying a car, which exposes illegal practices in the motoring industry. She warns if your car breaks down and if the tow is not authorised by your insurance, dealerships don’t have to repair. And if you’ve gone over mileage, they often don’t want to do the work.

“You automatically think that you’re covered, but you’re hardly ever going to be able to claim because they’ll find a reason to repudiate,” she says.

Motoring plans aren’t free, and the costs are often built in and not declared, which is in violation of the National Credit Act and the CPA, Slabbert says.

Motorists are “locked in” by these contracts and risk voiding their warranties if they go to unapproved workshops - and it’s not only for the major work. And even if the work is not covered by your policy, it still needs to be carried out at that approved shop.

Warranties on parts or accessories are currently dependent on the part being fitted by the dealership. Access codes, that are required for the functioning of certain components, are not being made available to the consumer or his service provider of choice.

This is an unnecessary cost to consumers, which the Right to Repair (R2R) campaign wants to change. In September, the Competition Commission published the final draft code of the industry’s code of conduct. Once published, stakeholders will have three months to respond on how they’ll implement the code.

R2R SA chairman Gunther Schmitz said the basic principle is about giving consumers choice. It’s saying if independent operators fulfil reasonable criteria, why shouldn’t they be able to service vehicles under warranty?

The draft code allows for the usage of non-original spare parts. Motor plans may not be automatically included in the price and may only be offered as an add-on. Tools, parts, training and technical information must be made available to the independent aftermarket.

This will ensure a more fair allocation of work by insurance companies, Schmitz says. “More competition is proven to reduce prices and increase quality for the consumer.”

He says the R2R code was implemented in the US and the EU decades ago with positive results, “so much so that in the US the R2R campaign is now spreading to other industries”.

There is no technical justification for not giving competent mechanics access to tools or technical information so they can do the work.

“Why should brake pads void the warranty of your engine or your airbag? In terms of existing law the independent service provider fitting the brake pads and the supplier of the brake pads will take responsibility for this work and give a warranty,” Schmitz says.

Slabbert disagrees. She points out that dealerships pay millions in set-up costs and staff need to be trained properly, which is also expensive. Opening up the market to potentially backstreet mechanics is a huge risk to consumers and the industry.

“When motorists take their vehicles to accredited repairers, all the work will be on the vehicle’s profile and there’s a record. So if there’s a recall, the dealership will issue notices to all customers and do the repairs. The smaller guys will not get that recall notice and the customer will have to pay for the parts and work.

“We don’t go to a doctor that isn’t accredited. Why should we go to a backstreet mechanic, who has probably been kicked out because he didn’t cut it?

Her issue, though, is with maintenance plans. “People are approaching us to ask us to check contracts before they buy. So I’ve negotiated with sales managers about on-the-road fees and brought those down for consumers. We’ve started offering the service - for a small fee - and we’ve saved consumers thousands on their contracts.”

Slabbert says salespeople are not declaring that they’re getting commission on the maintenance plans. “These are not free - every car, even a second-hand car, has a six-month warranty. If you charge extended warranties, for the first six months they should carry the warranty.”

The short-term insurance ombudsman has previously warned about mechanical warranty policies, usually sold by second-hand dealers, because consumers aren’t given precise details of cover, including the trip-up exclusions, waiting periods, penalties, excesses or restrictions.

Schmitz says they’ve witnessed similar issues. “Most of the extended warranties only cover certain components and limit the cover to a set amount. So, when it comes to a failure, the consumer is suddenly faced with a problem where the insurance only covers a fraction of an expensive repair.”


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