New Cars and Their Warranties

Ask around and the oft-repeated consensus on the subject of automobile quality is: “They don’t build them like they used to.”

It’s true. They build them better.

The evidence is in the number of independent repair shops that are closing, fewer parts sales by jobbers, and new-car dealers that are having trouble keeping their service departments busy.
Mechanical issues reported by owners of three-year-old vehicles have plunged from an industry average of 273 problems per 100 vehicles in 2003 to 155 problems in the latest J.D. Power and Associates dependability survey.

Hand in hand with better cars are the improved warranties that come with them. New-car guarantees were just 90 days long in North America until the early 1960s, when the one-year comprehensive warranty was introduced.

The burgeoning import-car industry unveiled three-year, bumper-to-bumper coverage in the early 1980s, a new standard every manufacturer was compelled to adopt or perish.

Today, the three-year/60,000-km comprehensive warranty remains the basic standard warranty, but many automakers have gone further. Virtually every premium brand, from Acura to Volvo, has adopted four-year/80,000-km coverage as standard, while four brands have gone to five years: Hyundai, Kia, Mitsubishi and, most recently, Jaguar.

Experts agree no automaker can afford to offer such lengthy warranties without building high-quality products. But some buyers are unaware of the limitations of a comprehensive or bumper-to-bumper warranty.

Commonly not covered are “wear items”, such as brake pads, shoes, rotors and drums, the manual clutch assembly, tires, batteries and any aftermarket items installed once the vehicle leaves the factory. Also not covered are malfunctions resulting from misuse — for example, if the CD player stops working because there’s a cookie inside.

“The warranty addresses defects in material and workmanship,” says Jim Seidel,
president of Carolina Tire & Auto Repair in Charlotte, NC. Not only have comprehensive and powertrain warranties gotten longer, but there are other no-cost benefits that accrue to warranty holders these days — services such as roadside assistance, towing and courtesy transportation.
The added benefits, including no more deductibles or warranty transfer fees, help differentiate the automaker in a hotly contested marketplace.

“The consumer is buying a comprehensive package, designed to take the stress out of owning a vehicle,” says Seidel. Industry observer Mohamed Bouchama of CarHelpCanada.com agrees vehicle quality and warranties are getting better, and so are the dealers who ultimately deliver the warranty service.

“Dealer response is better now than it used to be; dealerships are making an effort to appease their customers,” Bouchama says. But what consumers may not know is that there’s a delicate dance that takes place behind the service counter, as the dealership weighs the costs of submitting each warranty claim to head office. “Manufacturers watch who has the highest claims, so it’s in the dealer’s interest to manage warranty issues,” says Bouchama. Submit too many head-gasket repairs, for example, and the dealer may be sanctioned by receiving fewer deliveries of a hot-selling model.
George Iny, president of the Automobile Protection Association (apa.ca), says some dealers have told him they are tied to a warranty-claims quota, which lets them submit only so many of each type of repair per month, effectively making the dealer a gatekeeper for the manufacturer.

Iny says not every manufacturer operates in this manner, but the prospect of a quota system may help explain why auto dealers don’t always seem keen to do warranty work. There are other reasons, as well.

Manufacturers generally don’t recognize the labor rates specified in shop-standard manuals, which are considered to have a lot of fat in the estimated repair times (to be fair, these rates take into account seized bolts, etc.). Head office pays for a 60-minute hour, which means the technician and dealer make less money from a warranty claim than from a consumer invoice.

In addition, Iny says, most manufacturers will not pay for diagnostic time, considered the hardest part of an automobile repair. The time invested in finding the problem is not compensated by the factory, which makes warranty repairs especially unappealing.

It helps explain why service writers give Academy Award-worthy performances when customers complain about slipping transmissions and leaky head gaskets. “Most of the time, you’re being lied to when the dealership service manager says they’ve never heard of that problem in your model before,” Iny suggests. A quick check on the Internet for common faults with that model can provide the corroborating evidence. Reluctant to submit another warranty claim, the service writer may defer the inevitable by providing a stop-gap repair or adjustment until the vehicle’s warranty period ends, at which point the consumer gets the brunt of the complete repair cost, usually amounting to thousands of dollars.

It’s enough to make an automobile owner lose sleep at night, which may be why the proportion of new-car buyers who opt for an extended warranty is climbing, despite all the good news about better-quality vehicles and longer warranties.

Chris Travell, vice-president of Maritz Research’s automotive group, says 29 per cent of new-vehicle buyers this year have sprung for an extended warranty beyond the already generous coverage manufacturers provide, compared to 26 per cent three years ago.

“Given the economic challenges presently, a lot of buyers may be expecting to keep their cars longer, so an extended warranty makes sense to them,” Travell reasons. “The peace of mind argument is valid.”

Maritz scrutinizes purchase reasons in its consumer surveys, and Travell says warranty coverage is a significant part of the picture. “Roughly 47 per cent of buyers said the warranty package was extremely important to their purchase decision.” Iny recommends extended warranties for European models and domestic luxury SUVs.

“The concern with modern vehicles is not the powertrain, but rather the electronics. A seat heater for a Porsche Cayenne costs $1,200 and they are prone to failure. A radio costs over $2,000 and is wired to a universal bus, which makes other solutions incompatible.”

But as many seasoned car owners will testify, what the warranty spells out on paper and how it actually performs in the harsh light of the service counter are two separate things.

Seidel adds that new car owners can bring their cars into Carolina Tire & Auto and preserve 100% of their new car warranty. The Magnuson–Moss Warranty Act passed by Congress in 1975 ensures to general public that they do not have to take their cars back to the new car dealer for general maintenance and scheduled service as long as that service is kept up per the owner's manual. So instead of paying through the nose for your scheduled maintenance of 30,000, to 60,000 to 90,000 mile service, you can with 100% confidence take it to Carolina Tire & Auto and know that your new car warranty is still intact.

Stop by or call Carolina Tire & Auto today at http://www.carolina-tire.com/ or 704-553-9800