Used car warranties: Christian’s story

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Christian (name changed) bought a second hand car in late 2014. He had had gearbox trouble with a previous car which cost him a lot of money, so when he noticed advertising for National Warranty Company (NWC) warranties at the dealership he asked for more information about what it covered. The salesperson didn’t give much information, but referred him to NWC’s brochure for their Extension of Manufacturer’s warranty. Christian decided to buy the most expensive option, ‘Plan C’ ($1400), because he thought it was worthwhile going with a more comprehensive option.

Christian said that he thought he understood the extent of cover provided after reading the booklet. For example, he understood that the product only covered breakdowns, and required him to service the car to a certain schedule. The salesperson mentioned that wear and tear was not covered, which Christian understood meant things like tyres, oil changes and filters, but nothing broader than that. However, Christian said he did not realise that the warranty gave NWC discretion over whether or not to pay claims.

Some time later, the car’s turbocharger began leaking oil. Christian contacted NWC, had his mechanic look at the vehicle and sent a repair quote to the warranty company. NWC said that Christian would have to have the turbocharger removed from the car and dismantled to diagnose the problem, and only then would NWC be able to decide if the warranty would cover the repairs. Christian asked if he would be covered for that work, and the staff member at NWC indicated that there shouldn’t be a problem as Christian had the highest level of cover.

After doing further work, Christian’s mechanic emailed NWC to explain that they weren’t entirely sure why the turbo was leaking, but it was possibly because of a seal. NWC responded that they wouldn’t cover the repair as they don’t cover seals. Christian said that he couldn’t understand this response—if that component is covered, then it should be covered regardless of what went wrong inside of it.

This is an excerpt from a Consumer Action Law Centre report into used car warranties. Read the full “Donating Your Money To A Warranty Company” report here.

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