Some dealers offer an extended warranty for periods beyond the dealer guarantee or manufacturer's warranty. Make sure you read and understand the extended warranty booklet and can comply with its terms and conditions for the whole warranty period before buying the extended warranty. There are often many exclusions and special conditions.
Remember, you may have a free dealer guarantee when you buy a motor vehicle from a dealer:
- New passenger cars have a minimum 12-month dealer guarantee from the date of sale or 20,000km, whichever occurs first, from the manufacturer.
- Used passenger cars under 10 years old and with less than 160,000km have a three-month or 5,000km dealer guarantee which a dealer must provide free of charge.
- Used cars over 10 years old or with over 160,000km do not have a dealer guarantee or a manufacturer's warranty, they just must be roadworthy.
Go to the warranties page for more information on dealer guarantees.
What are extended warranties and how do they work?
There are many different types of extended warranties offered through motor dealerships by insurance companies or manufacturers. An extended warranty policy is usually a comprehensive 10-20 page booklet which is supposed to provide an additional cover to the free dealer guarantee or manufacturer's warranty for new or used vehicles. Generally, you have to pay extra for an extended warranty however, some motor dealers may include an extended warranty with a minimum (highly restrictive) cover, in the sale price or offer it free of charge to make the sale more attractive.
Exclusions and special conditions
Make sure you know exactly what is covered and what is excluded from the extended warranty policy. There may be special conditions that you need to follow for the cover to apply. Some typical extended warranty exclusions are:
- wear and tear
- car modifications, including tinting or paint changes offered by the dealer
- consequential damage or defect caused by misuse of the vehicle such as overheating or lack of oil
- specified parts or systems.
Be aware that an an extended warranty for a new car may not offer the same cover as the manufacturer's warranty, such as repairs of oil leaks.
Some common extended warranty conditions and requirements include:
- a regular service during the whole warranty period at a specified place (or dealer) at your own cost eg. every 5,000km/six months or 10,000km/12 months depending on the distance the vehicle has travelled
- an excess payment up to $500 per claim depending on the part that fails
- a service coupon must be stamped and posted within seven days
- a maximum payout limit which may not cover the necessary repairs and you may need to pay the gap yourself.
Tips on extended warranties
Here are some tips to remember:
- Take time to fully read and understand the terms and conditions before agreeing to buy one. If possible, take the booklet home and thoroughly read it before committing to it. Do not make rushed decisions on the spot.
- If the extended warranty is offered for 'free' or is included in the deal, expect claim limitations.
- Always confirm all terms and conditions in writing only. Do not accept verbal statements.
- Some finance companies may require you to purchase the extended warranty as a condition of approving your finance. You may end up paying more for your car than it is really worth and you will pay interest on the warranty as well as the car itself.
Motor vehicle extended warranty checklist
Who is providing the extended warranty?
- a manufacturer
- an insurance company.
Type of car and usage
- Is the extended warranty for a new or used car? Different dealer guarantees and manufacturer warranties apply.
- Is the car for commercial or private use? The extended warranty may not apply to commercial use.
- What is the period of the extended warranty?
- When does the extended warranty start? From the date of purchase or after the statutory or manufacturer's warranty expires.
Terms and conditions
- Are there any special requirements? eg. regular service every 5,000km or 10,000km.
- What does the extended warranty cover?
- What are the exclusions or restrictions?
- Can you cancel or transfer the extended warranty? It may cost extra.
- Is there a cooling-off period? Some policies may have a cooling-off period of 21 days. However, you may not get the full refund if you want to cancel the policy and you will have to do it in writing.
- Are there any claim limits?
- Are there excess fees for each claim you make?
- Where and how do you lodge a claim? You may be restricted to a particular repairer and number of claims you can make.
- How much does the extended warranty cost?
- How long do you plan to keep the car?
- Are you planning to move? If so, you may have servicing issues.
- Is it really worth the money?