What you need to know about extended warranties


You’ve bought a new car or home appliance and just when you thought the sale was concluded, the salesperson says, “Can I offer you an extended warranty with that?” Wait…what? What is an extended warranty and do you really need one?

The answer varies depending on what you have bought and the age of the item you have bought. For example, if you are buying a new car, it already comes with a free service plan for the first three to five years. A new car also typically comes with a manufacturer’s warranty, for example, both Subaru and Hyundai now offer five year warranties on new cars. This should cover any manufacturing defects to the original components, mechanical or electrical, for a certain period after the purchase date of your vehicle. Warranties may differ from one manufacturer to another, but on average, the warranty period is usually for three to five years, or for a specific kilometre distance. Warranties usually cover repair costs to pars such as the gear box, water cooling system or head gasket and other large parts in the motor engine.

You can buy an “extended warranty” when you buy a new car. This means that you are effectively buying extended cover for a longer period, so after five years when the original warranty expires, you will continue to enjoy the benefits of a warranty for a further two to three years.

Here’s the thing though:

  1. You might not keep the car for a full eight year period. Most consumers, and South Africans in particular, are in the habit of changing their cars every three to five years, so you are unlikely to need the extended warranty.
  2. When you trade in the car or sell to a buyer, you are unlikely to recover the cost you laid out for the extended warranty.
  3. If you did choose to keep the car for longer than five years, there is nothing to stop you from buying an extended warranty five years after you initially bought the car.
  4. An extended warranty can cost anything from R3 500 for a basic warranty to R8 500. If you buy this product when you are buying a new car, chances are that you are buying the car via a hire purchase agreement with the bank and the cost will be added to the total loan value. So, effectively, you are now going to be charged interest over the next five years for a product you will only need in five years’ time.

An extended warranty might make more sense if you are buying a three or five year old car, which is no longer covered by the manufacturer’s warranty. Ideally, if you do buy an extended warranty, you should have factored this into the cost when you were saving for the deposit on your car. This means you can pay the cost of the warranty upfront in cash and you can avoid paying interest charges which you would be liable for if you added the cost of the warranty to your hire purchase agreement.

You could also just save the “premium” you would have paid each month for an extended warranty and use your savings towards the maintenance costs of your car. Bear in mind that by the time you face additional repair costs and your original manufacturer’s warranty has expired, you are likely to have finished paying your car or to be quite close to the end of your loan agreement.

Extended warranties on appliances

When it comes to appliances, it helps to do your homework. Find out what the manufacturer’s reputation is for after-sales service. You can do this by checking customer service sites such as Hellopeter.com. Businesses are rated out of 10 and are judged on criteria such as the number of reviews received, the sentiment expressed by consumers, the company’s response time and the number of conversions (where an unhappy customer becomes a satisfied customer).

You should also bear in mind that most things covered by an “extended warranty” on an appliance (such as accidental breakage) would also be covered by your household contents insurance policy. In addition, by the time you require an “extended warrant cover”, you might actually be better off simply replacing the said appliance i.e. the replacement cost might be cheaper than the cost of the extended warranty.

  • First published in City Press on 5 June 2016. 


Leave a Reply

Your email address will not be published. Required fields are marked *