Do warranties impact the value of your car?

What is a car warranty?

A car warranty is a form of financial protection for your car, covering the cost of labour and replacement parts for repairs within a specified timeframe or mileage limit stated in the policy.

The repairs covered are usually those caused by manufacturer or mechanical faults (such as engine or gearbox failure). As such, car warranties can provide valuable financial reassurance for new car buyers during the first few years of ownership.

Manufacturer warranties are automatically issued to new cars and last between three and seven years, whereas third-party warranties can be purchased separately and offer customisable, extended coverage.

Types of car warranties

There are three main types of car warranties available in the UK, offering varying levels of coverage:

• Manufacturer’s warranty: Included in the price of your new car and provided by the vehicle’s manufacturer, covering a range of mechanical and electrical defects caused by manufacturing faults.
• Powertrain warranty: Covers repairs and replacements associated with essential components that make the car move, including issues relating to the engine, transmission and drivetrain.
• Extended warranty: This type of warranty is an optional addition to your car’s warranty and provides extra coverage on top of what the standard manufacturer or powertrain warranties include, with enhanced breakdown and repair protection.

Most car manufacturers, like Audi, offer warranties for new vehicles.

Why should you get a car warranty?

• Many modern cars have intricate electrical systems that can be costly to fix without a warranty - and fixing larger faults within the engine or fuel system can leave you out of pocket if you’re unprepared.

• Car warranties can shield you from unexpected repair costs if anything goes wrong. With a warranty, you can drive confidently, without worrying about costly faults and the hassle of car repairs.

• Warranties can help to maximise your car’s longevity too, as they cover many of the essential repairs that will keep your motor running smoothly for years to come.

• Your warranty can even protect your car’s resale value. If your car is still covered by a warranty when you sell it, this can boost its appeal and instil buyers with confidence.

How do car warranties affect car value?

When valuing your car, it’s important to account for any warranty cover you might have.

A used car with an intact warranty from the manufacturer or a third-party provider will often sell for more than an identical one with no warranty cover.

Given that buying a used car is riskier than buying new, many used buyers are looking for reassurance that they won’t be left out of pocket.

Therefore, used cars with intact warranties are highly sought after, which is reflected in their higher resale values.

What is the difference between car insurance and a warranty?

A car insurance policy and a warranty both provide financial coverage to protect you against faults and repair costs. However, they serve different purposes and provide different coverage for your car.

Is it worth taking out a car warranty?

• Unlike insurance, car warranties are not a legal requirement for drivers. However, taking out an extended warranty can provide you with extra financial protection that could be beneficial in the long run.
• This is especially true if you have an older or higher mileage car that presents an increased risk of mechanical faults.
• Whilst an insurance policy may provide more extensive coverage for your car in the event of accidental damage, warranties are transferable between owners, which can boost your motor’s resale value.
• Car warranties can vary significantly in price and the degree of coverage. Exploring your options before committing to a policy allows you to find a warranty that’s right for you and your budget.

Can you sell a car without a warranty?

Yes, given that warranties are not a legal requirement for cars in the UK, you can sell your car without warranty cover.

However, if your car has a warranty, it should have a higher resale value than similar cars without warranty coverage.

Warranties increase a used cars’ appeal and provide buyers with extra reassurance, especially for older models that are more likely to develop faults.

If your car doesn’t have a warranty when you come to sell it, don’t worry. There are other steps you can take to boost its resale value such as:

• Ensuring the full service history is available.
• Investing in a vehicle inspection to prove the car is in good working order.
• Having the car serviced and getting an MOT test (if there is less than 6 months’ MOT cover remaining).

Checking these boxes can reassure buyers that your car is dependable even if it’s no longer covered by a warranty.

What happens to a car’s warranty when it is sold?

• If a car is sold when it’s still under the manufacturer’s warranty, the warranty will continue until the end of the specified cover period, or the mileage limit is reached.
• The warranty may be voided if the new owner breaches its terms.
• Many extended warranties offer transfer options, so that cover can be carried over to the car’s new owner.
• This usually involves notifying the provider and submitting your warranty documentation, along with any transfer forms – and paying the associated fees.

• It’s a good idea to explain the transfer process to the buyer, so that everything goes as smoothly as possible.