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Warranty or repair contract? As truck technology carries on improving,
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some hauliers are finding that an extended warranty is not worthwhile. CM weighs up the options...
Are extended warranties really worth the paper they are printed on? It's a question that many buyers of new and second-hand trucks ask. Is it worth paying for a warranty rather than, say, a straightforward repair and maintenance contract? Or should you just look after your own vehicles?
You can, of course, combine all of these things. You can have a warranty, a repair and maintenance contract and take care of your trucks yourself. However, that said, it is still unclear how extended warranties are likely to develop.
Robin Dickeson, commercial vehicles affairs manager at the Society of Motor Manufacturers and Traders (SMMT), says extended warranties are out of fashion. "The' seem to be less popular. Manufacturers seem less keen to offer them — they're being superseded by repair and maintenance contracts.
One of the difficulties, says Dickeson, is that extended warranties are not usually 'mileage limited', so those companies offering them have difficulty in distinguishing between an operator running trucks on triple shifts for 250,000 miles a year and those doing just 50,000 miles.
Dickeson adds: 'Since warranties are ill-defined, they don't lend themselves to a particular operator's requirements, which can be many and varied."
In addition, Dickeson says that while initial warranties are normally underwritten by the manufacturer, warranty extensions are often underwritten by an insurer, which can mean a different approach. He adds: "The perception is that an insurer is likely to look for reasons not to pay out, while a , manufacturer is more interested in preserving its relationship with the operator."
Dickeson also points out that UK hauliers are canny not just in the way they choose their trucks, but also in the way they finance and look after them. He states: "It's important to understand that the UK market is the most sophisticated in Europe in terms of its approach to leasing and so on. And most manufacturers use the UK as a test bed for financial engineering as well as mechanical engineering. The result of all this, argues Dickeson, is that both operators and manufacturers are increasingly tending to turn their back on extended warranties.
It certainly seems true that many operators are not inclined to pay for any warranty above those offered on purchase, particularly if they think they can look after their trucks well enough on their own. Some operators don't purchase warranty extensions because they don't have any old trucks in their fleet. Others prefer to be self-reliant for maintenance.
Paul Marklove, transport manager at Gloucester-based Eric Vick Transport, says his company is broadly happy with the warranties it has on new vehicles, but does not extend them because it feels its own maintenance programmes are comprehensive enough to keep vehicles in top condition.
"We find the original warranties useful, particularly if a major component goes, and, in the main, we find that the companies providing the warranties stand by what they say," he says.
Marklove adds that the one difficult area with warranties is when a major component breaks down just after a truck goes out of warranty. "It's also true that some vehicles have got common faults things that are more likely to go wrong," he adds.
Marklove agrees with Dickeson that warranty requirements are likely to vary among hauliers.
Eric Vick's trucks, for example, do not run night and day like some of the bigger hauliers, who believe that any time a truck is not on the road is wasted time.
Marklove says: -For us, it is one driver, one vehicle, so that means less pressure than those [sorts of] operations that run their vehicles 24 hours a day."
Despite this, most of the manufacturers offer extended warranties and some still argue they are an important part of the business. Renault is one example. Marketing and communications manager Penny Randall says: "Renault feels that extended warranties are still very much in favour."
Warranty take-up
This is reflected, Randall adds, in an increase in the take-up of extended warranties on new trucks from 77% to 79% between 2007 and 2008. Figures for 2009 are not yet available, although Randall says: "The trend continues to be positive."
This doesn't mean, however, that Renault buyers necessarily go for extended warranties instead of repair and maintenance contracts Sometimes they do, but other operators opt for both.
Randall continues: "Warranty extension sales continue to be strong with customers that choose not to take out a repair and maintenance contract. We are also seeing an increasing trend where customers will take, for example, a three-year repair and maintenance contract on a new vehicle with an additional two-year warranty extension. It all depends on the requirements of their business."
Mercedes-Benz is another manufacturer happy to provide warranty extensions. But spokesman Ian Norwell points out that with its warranties (and indeed all warranties), it is important to he clear about what they do and do not include. In some cases, this is straightforward enough. As mentioned, consumables such as tyres and bulbs are not covered. Nor is routine wear and tear, although this can be an area where there is room for argument. The classic example is the clutch. Clutches can wear out naturally (not covered), fail because of a fault (covered) or wear out because of poor driving (not covered).
Norwell says: "You can get rid of a clutch in 25 minutes if you treat it badly enough. So something like this often has to be investigated before it is clear whether a warranty will cover it or not."
Other routine warranty exclusions include anything caused by a collision or accident; a fault arising out of the fitting of non-approved parts; and any special adaptations, such as liquid petroleum gas installations.
There are some more exotic exclusions that crop up, including damage caused by radioactivity from irradiated nuclear waste; and pressure waves caused by aircraft. It's worth reading the warranty coverage carefully, particularly the list that many contracts contain (including Mercedes-Benz's) covering "important exclusions".
Exactly how many hauliers take up extended warranties across the truck market is hard to assess, but one way is to look at the amount of warranty work carried out by garages. This varies depending on the workshop, but, for some, it is a relatively small proportion.
Gavin Scott, company secretary at Lincolnshire company R&A Scott, a MAN service agent in Gainsborough, says that just 4.4% of its turnover is warranty related. This compares with 12% carried out under repair and maintenance agreements.
The low percentage of warranty work may be down to the fact that most warranties invariably cover new trucks, so there is less to go wrong with them.
Scott says: "We deal with everything, but we specialise in MAN, and when they are under manufacturer's warranty very little goes wrong."
This is not entirely surprising. Most modern trucks are well engineered and constructed, so if they are properly driven and maintained they shouldn't cause too many problems. Of course, this is good, but may be another reason why choosing to extend warranties is less popular than it used to be. As an operator, if you do everything else right, a warranty's main role might be to provide peace of mind.
Marketing methods
Peace of mind is vital, and many manufacturers of trucks and vans realise this. A number of recent truck and van launches have underlined how manufacturers can use warranty guarantees to boost sales.
For example, lsuzu Truck (IJK)'s entire product range up to 18 tonnes comes with a three-year unlimitedmileage bumper-to-bumper full warranty. Hyundai is another vehicle manufacturer that has made much play of its five-year/unlimited-mileage warranty on its new van, the iLoad.
In many ways, the commercial psychology of warranties is similar to bank loans. Just as the banks are happy to offer loans on good terms when you don't necessarily need them, so truck and van makers will happily give you a warranty if they are confident the vehicle will not go wrong. The difference is that an unwanted bank loan is useless, but an extended warranty might help you sleep a little easier at night. •