Warranty may not give a run for your money: Used-car buyers often find that extended cover is of limited value

ALMOST exactly a year ago, I bought an Audi 80 saloon. Although I felt I was buying a solid model through a main dealer of a reliable manufacturer, the prospect of being covered against expensive repairs in the next year for an outlay of just pounds 325 seemed attractive.

After all, everyone buying a used car - even from a reputable dealer - is slightly uneasy about the transaction. So the customer who is concerned that the model gleaming in the showroom might shudder to a halt just round the corner is bound to be reassured by the idea of paying a bit extra in return for 'not having to worry about anything going wrong'.

But this sense of well-being may be shortlived. My eyes were opened when I put the car in for its annual service.

The service department of Dovercourt Battersea, the dealership from which I had bought the car, called to say there were a few things that needed doing.

'Fine,' I said. 'It will be covered by the warranty, won't it?'

'Er, no,' said the garage. 'It doesn't include wear and tear.'

A close look at the terms and conditions confirmed this. In fact, the warranty did not appear to cover very much. After the realisation - not pointed out at the time of purchasing the car - that there was a pounds 750 claim limit, the pounds 325 was looking less like money well spent.

Imco, which administers the policies for a range of manufacturers, said if it had been notified of this it could have raised the issue with the manufacturer and the dealer. One of a number of options, including increasing the claim limit, could have followed, a spokesman said.

All is not as it might appear, because the sales person who extols the benefits of such a deal is usually selling - for a small commission - an extended warranty, something that conjures up notions of guarantees and the like.

This is not quite the case. Unlike the manufacturer's warranty - a statement about the quality of workmanship and a commitment to put problems right - that accompanies a new vehicle (and may apply to a used one if it is young enough), the extended warranty is in fact an insurance policy.

As such, it is like those policies sold on electrical goods that have come in for heavy criticism in the Independent on Sunday and elsewhere. A Consumers' Association report found that purchasers would often be better off taking a risk on the product breaking down.

The car buyer pays a sum, or premium, and receives mechanical breakdown insurance, or MBI cover against certain things happening.

Typically, this includes failure of specified components, including drive shafts, cylinder heads and gearbox components. The cover is usually subject to conditions, such as regular servicing at approved places.

In some cases, as Sean Wadmore, senior consumer affairs officer at the Society of Motor Manufacturers and Traders, admits, buyers would be better off 'crossing their fingers and hoping for the best'.

Like Volkswagen-Audi, Nissan offers branded warranties.

Although a spokesman for Dovercourt claimed that Volkswagen and Audi offered the best used-car extended warranties, Nissan's appear to provide a better deal. Twelve months for a Primera-type standard saloon costs about pounds 230, and two years just under pounds 400. The only limit on claims is the selling price of the car.

In addition, many used Nissans will be covered by the company's original warranty, which - at three years - is two years longer than the industry standard. A spokesman said there were few claims, largely because the original warranty was so comprehensive.

The code of practice drawn up by the SMMT, in consultation with the Office of Fair Trading, is clear about what procedures should be observed. It points out that the policy must be written as a direct contract between the insurer and the consumer and should be drawn to the consumer's attention.

Although the organisation operates a complaints and inquiries service, Mr Wadmore said the number of disputes was a fraction of the claims settled without a problem. Imco added that only a tiny percentage of people cancelled their policies.

Manufacturers offering branded warranties would often settle in the interests of retaining customer goodwill, Mr Wadmore said. But he stressed that general - and usually less comprehensive - policies made available to unfranchised dealers could be withdrawn if the dealers were discovered to have been abusing them.

However, he acknowledged the difficulty in translating the code into practice. Although the MBI concept had been around for some time, it had become more common in recent years, and it was therefore possible that sales people were becoming blase about the policies. There was no doubt that some promoted the idea that they would cover everything, in order to sell them, he said. In theory, these people could be prosecuted under the Trade Descriptions Act.

Dovercourt said its sales people were about to take an Imco training course on warranties - the first offered as a free service, although they have been available at a cost to the manufacturer for some time. It accepted that it was important to keep its staff aware of developments in a complex market.

Meanwhile, it appears to be up to customers to question dealers closely about the policies.

'At the end of the day, you can make the terms as clear as possible. But if the salesman is not interested in explaining and the buyer is not asking, what can you do?' Mr Wadmore said.

(Photographs omitted)