4 Year Lease Agreements And Your Warranty
Friday, 21. February 2020
There has been an increase of late in extensions and customers taking out 4 year PCP, PCH and contract hire agreements. This is done mainly to save money on the monthly rental but after allowing for the various costs that come into play after 3 years you may find that it’s a false saving.
When I looked to extend the lease on my Mercedes E Class I checked with my local dealer and was quoted nearly £900 for a 1 year extension to the Mercedes warranty. Had I leased my car over 4 years the lease cost would have been just £18 + VAT less per month when compared to the 3 year rate.
Then there are other subscriptions such as the Sat Nav which generally come with free updates for 3 years but you have to pay the subscription thereafter. Roadside assistance is also generally included for a minimum of 3 years with all new cars so there’s another extra to pay for. It all adds up.
On top of that, there is service and maintenance and possibly another pair of tyres. Obviously, as the car gets older it requires more wear and tear parts to ne replaced, brake discs, suspension dampers, filters etc.
So this raises the question as to whether it’s worth taking a car over 4 years given the fact that you will need to take out an extended warranty that could represent around half of the down payment on the next car, which of course comes with a new car warranty.
There are of course cars that come with 5 and even 7 year warranties but on closer inspection, you will find that a large number of components drop off cover after 3 years as a result of normal wear and tear. So things are not always as they seem. You could, of course, Google the market for a lower-priced warranty than the manufacturer’s own. However, whilst they love to take your money there are some that hate paying it back out.
Beware of betterment! As cars get older the warranty companies will try it on. Let’s say in the 4th year you have a problem with the gearbox. The manufacturer or the warranty company agrees to replace it under the warranty but as the car is, say three and a half years old they have a betterment clause in their warranty that says, if the replacement part puts the car in a better condition than it was before the part went faulty that you should contribute to the replacement.
So the replacement gearbox could cost you 2 or even £3,000 towards the cost of the replacement gearbox. It’s a scandal. So if you are going to take out a 4-year contract or extend a 3 year contract, check the true cost of that last year and if you extend the warranty check the betterment clause. Also check out Warranty Direct. They may be a little more expensive than some other 3rd party warranties but the have some of the best terms and conditions and no betterment charges. By Graham Hill
