MOTORING NEWS - Do you know the difference between a service plan and a maintenance plan? What about a factory warranty, and an extended factory warranty?
For many consumers understanding these options can be confusing. Many buyers also don't know their rights and whether these products are optional or mandatory.
"When buying a vehicle, it's important that 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 actual vehicle meets all your needs," says David Chard, managing director of AA Warranties.
Service and maintenance plans
Service and maintenance plans have limited lifespans when bought with a new vehicle. They will remain active for as long as the car has a specific number of kilometres, or is of a specific age. This information is specified at the point of sale.
A service plan covers the costs of regular scheduled services determined by the manufacturer. Items covered under a service plan 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. 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 for consumers. It can either be bought upfront, as a term product, or can be purchased as an on-going product, as it is a monthly payment. But 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 maintenance plan is more expensive, but more comprehensive. It 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 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.
Chard says that these extension or replacement products are especially useful, and important, for two reasons.
In tough economic times car owners keep their vehicles for longer before replacing them. In the past, owners may have opted for new cars every three to five years. Now, this has been stretched out to seven or more years.
A second reason is that more pre-owned vehicles are being bought. But, while buyers still want peace of mind, manufacturers' service and maintenance plans may not be applicable any more.
For this reason, extended warranties are growing in popularity in South Africa as car buyers, both of new and pre-owned vehicles, either extend or renew plans which will cover them in the event of breakdowns.
An added benefit is that some of these warranties are available on a pay-as-you-go basis, meaning buyers can purchase them on a monthly basis and not only when cars are changing hands at a dealership. "This is an extremely attractive option for many buyers," says Chard.
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