Warranty a confidence booster
Buying a car is a significant expenditure, what with the cost of gas, general maintenance, the loan repayment, insurance - and those pesky traffic tickets every now and then.
As with any investor, new car owners are looking for a safety net in the form of warranties to help offset costs in the event of accidental damage. The cost of damage could run into the hundreds of thousands of dollars, depending on the type of vehicle, and could help preserve that no-claim bonus on your insurance.
According to Kent LaCroix, chairman of the new-car umbrella group Auto Dealers' Association (ADA), "Some warranties are adjusted from time to time
by the manufacturer. Basic minimum within the sector is two to three years or 60,000 to 100,000 kilometres, whichever comes first."
With a tug-o-war for customers between new and used-car dealers, it is little wonder several of the former have opted to increase warranties in a bid to lure buyers and signal confidence in the product they sell.
In the used-car sector, dealers are only willing to offer warranties for three months on engine and transmission despite claims by some customers of experiencing problems mere weeks or days after purchase.
According to Matthew Stevenson, brand and sales manager for Suzuki at Stewart's Auto Sales, which this year increased the warranty period to five years under Suzuki's Triple 5 promotion, said it was done "to give more value to the customer. It's a strategic move from Suzuki Japan. It shows that they have confidence in their products by upping the warranty to five years."
Given that cars are depreciating assets, many dealers are often keen on the resale value. When the warranty is still in effect at the time of resale by the first owner, it usually helps the value of the car. LaCroix noted that "in most cases, warranties that remain are passed on", remaining in effect for the person purchasing what would now be a second-hand vehicle. This, in essence, makes for a good buy. However, if the warranty period was up, LaCroix does not believe the resale value on the car would fall significantly.
Stevenson, too, believes that the resale value on cars under warranty will fetch a better price than one on which the warranty period has expired. "I would rather buy a three-year old car, which has two years warranty left, than one with no warranty, provided that the mileage is decent," he said. With respect to cars outside of the warranty, he said, "It's yet to be seen if it does help with the value, but I assume it would."