We have written extensively at The Car Expert about the benefits of buying a good used car warranty once you have found yourself a new, second-hand, vehicle.
These warranties – or mechanical breakdown insurance – are designed to protect you from the cost of your pride and joy suffering an unforeseen failure. Levels of cover can vary from policy to policy, but a quick check of the small print and you’ll soon discover what your intended policy covers. At the very least, it should be the most important mechanical parts.
Being covered by a used car warranty means you won’t be left alone to deal with the mess of a part failure or breakdown. And most policies don’t just take care of the cost of replacement parts – they can also cover labour and (depending on your level of cover) important extras such as car hire.
So, many motorists, particularly those who drive long distances, rely on their car heavily, or have spent good, hard-earned money on their new wheels, a warranty can prove a smart investment.
But only if you receive what you think you’re going to get, if (or perhaps when…) the time comes for your car to let you down.
That’s why it’s important to consider buying a fully insured warranty, not least because you can then be assured the company you’re dealing with is regulated by the Financial Conduct Authority (FCA).
For a start, an insured and regulated warranty provider must report to the FCA twice a year. This must include solvency to meet regulatory requirements for insurance firms and groups, covering financial resources, governance and accountability, risk assessment and management, supervision, reporting and public disclosure.
Additionally, a regulated warranty provider will pay a levy to the Financial Services Compensation Scheme (FSCS), which can pay compensation if the firm you’ve used has gone out of business and can’t pay your claim. It’s funded by the financial industry – banks, building societies, insurance companies and pension schemes – and providers of insured warranties will pay thousands of pounds into the FSCS coffers every year to enable it to operate.
And as a third safety net, buying an insured warranty means that if you are unhappy about the service you’ve received, or the policy terms or claim settlement, you can go to the Financial Ombudsman Service (FOS) for a binding decision. Whatever ruling the FOS makes, your insured warranty provider will have to obey. An unregulated provider does not have to do this.
It’s quite easy to spot an uninsured plan, if you know what to look for. They may be advertised as a ‘warranty’, but check the small print and you’ll see they are ‘discretionary’ schemes and firms will use that word frequently: “the amount of compensation made is at the discretion of the scheme administrator…”. In some cases, this can mean no pay-out at all.
And although they have to adhere to basic standards and codes of practice, these providers are not monitored in terms of the FCA mandatory regulations and so don’t have to answer to, or abide by, the regulated bodies and their rulings. In other words, they can offer a range of products, but they are not obliged to pay when a claim comes in.
An industry source confirmed that sellers of uninsured plans are free to advertise cover that ultimately they don’t have to pay out for.
So, like any insurance cover, you may or may not need to claim on it, but, after you have spent decent cash on your new car and bothered to find a warranty policy to cover it, how much of a risk you are prepared to take on the chances of getting the compensation you need if something goes wrong, is something worth giving some serious thought to.
Here at The Car Expert, we have some fantastic warranty offers for our readers provided by our commercial partners. If you’re interested in a used car warranty, you should check these out: