Service contracts, maintenance plans and warranties are offered on new and used cars. What do they cover and how do they differ? File Image: IOL
Service contracts, maintenance plans and warranties are offered on new and used cars. What do they cover and how do they differ?

A factory warranty is a contract that protects you against manufacturer defect or malfunction, similar to the warranties on any other goods. A service plan covers the cost of routine services, and includes filters, brake fluid, oil, spark plugs and coolant. A maintenance plan also covers wear-and-tear items, including the clutch, exhaust and wiper blades. Some warranties are insurance products that cover a selected number of items.

“Manufacturers offer different plans. Service and maintenance plans are available for new and used cars. Both plans are sold by dealers. On new cars, most have a plan as part of the standard specification of the vehicle,” says the National Automobile Dealers’ Association (Nada).

Most manufacturer plans, whether they are service or maintenance plans, have mileage or age stipulations of varying time and distance - for example, five years or 150000km, whichever comes first.

There are also flexible third-party plans available from after-market suppliers. However, the prices generally rise with the age of a vehicle and the distance it has driven. “Some offer coverage for very old or high-mileage vehicles,” Nada says.

Brakes are generally not included in a service plan, as they are considered exclusionary wear-and-tear items. However, maintenance plans do cover brakes. Wear-and-tear is damage that inevitably occurs as a result of normal use or ageing.

A maintenance plan is a convenient way of ensuring that maintenance costs are taken care of. They are fixed: they do not change for the duration of a contract, nor are prices affected by inflation.

“You buy the plan upfront, ‘effectively’ paying today’s price for tomorrow’s maintenance,” Nada says.

A service plan pays for the servicing of the vehicle. You don’t pay a cent for the scheduled services during the duration of the plan.

Most warranties cover failures for items contained in the policy schedule and will cover various parts up to different mileage levels. There are factory or manufacturer warranties and there are insurance products that are sold as extended warranties. There are also products to boost the manufacturer warranties in areas where they may be lacking.

The warranty for a vehicle is usually for three to five years, or for a specific kilometre distance.

An extended warranty is an insurance product sold to a consumer to cover uncertain future events. It is not a service contract. An extended warranty extends the time, duration and kilometres of the original manufacturer warranty and starts only when the original warranty expires. This can be bought as either a manufacturer warranty, or from a third party provider.

There are also warranties sold to customers that are insurance products that cover a selected number of items.

Each original equipment manufacturer has its own restrictions when it comes to warranty items based on mileage.

A clutch is a typical example of a wear-and-tear item not covered under a manufacturer’s warranty.

“It is important that you understand the cover on offer. While longer and higher-distance plans and warranties will keep you covered for longer, you should consider the cover that suits you best. You may plan to keep a vehicle for a longer, or you may trade in your vehicle more often, and your warranty should take into consideration expected ownership periods,” Nada says.

“In almost all cases, plans and warranties are tied to regular service intervals and are at risk of being voided should a scheduled service be missed. Service and maintenance plans can also be cancelled for unauthorised vehicle modifications or upgrades.”