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Know Your Plan: The Difference Between a Service Plan and a Warranty

When purchasing a car, it can be daunting to have to deal with – and make decisions about – which motor financial services products or plans to invest in. Often times, they all sound the same and the added cost of these plans can almost seem unnecessary on top of the monthly instalments you have already committed to for your car financing and insurance.
Greig Hains, Managing Director at motor financial services provider, MotorVaps, outlines the key differentiators between the two most popular value-added products (VAPS) – warranties and service plans. “With a better understanding of what these plans cover, you can make an informed decision on which is best for you.”
A warranty is basically a contract with your car’s manufacturer (or alternative service provider) that if anything goes wrong with the mechanical components of your car, these defects will be resolved or repaired at no cost to you.
New cars almost always come with a warranty which differs from one manufacturer to another – as well as across vehicle ranges and models. However, all warranties are restricted in terms of a set time and/or mileage – for example, a three year or 100 000km warranty will only be valid for the stated period or mileage, often whichever comes first.
For those purchasing a second-hand car that is no longer under warranty, motor financial services companies like MotorVaps offer extended warranties for vehicles of different brands and ages.
Components most commonly covered under warranty include the engine, gearbox, differential, turbo assembly and more. These are essential, and expensive, components that are critical to the safety and smooth running of your vehicle.
The servicing and maintenance of the vehicle is not covered under a warranty. Likewise, any damage due to driver abuse, negligence or incorrect use could impact your warranty terms.
Service Plans
A service plan covers the cost of having your car serviced at set intervals, by an authorised service centre, in line with manufacturer recommendations. As with a warranty, service plans are generally restricted to a specified time and/or mileage.
Services often include the replacement of items like air, fuel and oil filters, brake fluid, oil and gearbox oil, spark plugs and coolant (depending on the manufacturer’s specifications). The regular servicing of a vehicle is vital for it to run optimally and safely. Investing in a service plan also means that you are not impacted by price changes relating to labour or parts – you have agreed to the once off (or monthly) rate and are therefore able to budget accordingly.
A common misperception is that a service plan is totally comprehensive and covers other components such as those impacted by wear-and-tear. This is not the case. Wear-and-tear items like brake pads and windscreen wipers are covered under a maintenance plan (a more comprehensive plan which also encompasses all servicing costs).
Hains explains that it wasn’t all that long ago that only top of the range vehicles came with these VAPS. “Now, most cars are sold with some kind of service or maintenance plan – either included in the purchase price of the car or as an optional extra. Older, second hand cars are also eligible for a service plan through reputable motor financial services providers.”
“While these VAPS come at a cost, they are a life saver in the event of an unexpected mechanical fault or when a major service is due to be carried out on your car to keep it running optimally. These circumstances can really take a bite out of your monthly budget if you haven’t planned for them in advance,” he adds.
Hains highlights that it is crucial for South African motorists to know what is available to them when purchasing a new or used car.
“Many motorists already have these plans and don’t know what they are entitled to. Others are aware that their plans are coming to an end and believe that they have no options to extend their coverage. It is important for South African motorists to take some time to investigate which option makes sense for them, to save them money, grey hairs and sleepless nights,” he concludes.