OFT puts skids under car warranty rip-offs

The watchdog has its eye on the motor industry, says Sam Dunn
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The Independent Online

Few car buyers keen to put a brake on costs have been given a helping hand by the Office of Fair Trading. The consumer watchdog has drawn up a 10-point plan to prevent motorists being ripped off when purchasing car warranties and, in particular, extended warranties from franchised dealerships.

The OFT warns that these policies often tie you into expensive, long-term, car-servicing deals that can cost 70 per cent more than similar deals from an independent garage, or be invalidated if you clock up too many miles.

"When you combine car servicing restrictions with customer confusion about warranty terms and conditions, it drives up prices and reduces choice and convenience for the customer," says Julia Smith, an OFT spokeswoman.

But, in many cases, drivers have only themselves to blame, as the excitement of buying a new car can push the small print of a warranty policy to the backs of their minds.

More than 2.5 million new cars are sold in the UK each year. All carry manufacturers' warranties that cover the cost of repairing faults for at least a year. Many car manufacturers also offer, at no extra cost, a dealer-based extended warranty, giving you the same service for up to three years or more.

However, restrictions may apply to these; for example, the terms of the warranty may specify that routine services must take place at approved garages. The watchdog's research shows that servicing at franchised dealer garages is generally more expensive than at independent operators. With no apparent difference in quality, the average cost at an independent garage is £116, against £199 at a warranty tie-in garage.

Franchised dealers carry out around 90 per cent of services on cars up to three years old, a situation that is in part down to consumer confusion. Two-thirds of car owners believe their warranty will be made invalid if they use an independent garage, according to the OFT.

But this is not always the case. Following changes to competition rules on such deals, and a threatened OFT investigation, more manufacturers and franchised dealerships are now lifting restrictions on their policies.

"Some car manufacturers have been quicker than others to change terms and conditions," admits Nigel Wonnacott, a spokesman for the Society of Motor Manufacturers and Traders, the UK car industry's trade body. But he expresses concern that there is too great a focus on the basic price of a car service.

The OFT recommends that, when buying a new car, you ask about restrictions on where it can be serviced. You should also get details of average servicing costs and check these with your local garage.

Find out, too, how frequently you need to get the car serviced. If you don't do this as often as the warranty terms demand, this could affect the validity of the agreement.

Finally, ask about the impact of any accident on the warranty, and double check to see how long the agreement lasts.

It's also a good idea to compare different dealerships' individual warranty terms and conditions. Some will prove more flexible than others, for example on mileage restrictions.

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