New car warranties

27 June 2006

The OFT has published an independent evaluation of the new car warranties market study. The evaluation found that car owners and fleet operators saved between £120 million and £170 million over two years as a direct result of OFT intervention in the car after-sales market.

Download Evaluating the impact of the car warranties market study (pdf file 554 kb).
See press release.

14 May 2004

All major makes of new car in the UK will in the future be sold without servicing ties as part of their warranties, following action by the OFT.
See press release.

30 March 2004

The OFT has today launched a campaign encouraging buyers and owners of new and nearly-new cars to check the terms and conditions of car warranties, and to compare warranties when looking for a new or nearly-new car.
See press release.
See Car warranties - what to ask for before you buy in the consumer information area of the site.

17 December 2003

The OFT's study of the car warranties market found that the conditions that make warranty cover dependent on the car being serviced at the manufacturer's franchised dealer limit consumers' choice, and may lead them to pay higher prices for servicing.

The study also reveals that there is widespread confusion among consumers about the terms attached to their warranties, with most believing that they must have their car serviced at a franchised dealer for the warranty to remain valid, when this is not necessarily the case.

If the market worked better, possible savings for consumers could be up to £500 million.

Download New car warranties (pdf file 398 kb)

Download Car warranty survey (pdf file 469 kb) 

Recommendations

The OFT recommends that:

• manufacturers and dealers should improve their advice to consumers on their options for servicing new and nearly-new cars and their statutory rights
• manufacturers and dealers remove servicing restrictions from their new car warranties, to improve consumer choice and aid the development of more effective competition in the car after-sales market.

To promote further the development of competition in the market, the OFT will:

• launch a consumer awareness campaign in spring 2004 to provide clear information to buyers and owners of new and nearly-new cars about the choices available to them for servicing their cars
• issue business guidance to motor dealers and others in the car trade on the advice they should be providing to customers about servicing requirements
• work with motor trade associations on developing effective consumer codes of practice that include the requirement to provide clear and transparent information to consumers about servicing requirements and prices.

If servicing restrictions remain we will consider launching a formal investigation under EC competition law.

See press release.

Background

In addition to the manufacturer's warranty (usually one or two years), new cars are often sold with a free dealer based extended warranty that increases the warranty to three years.

The majority of dealer based extended warranties, and some manufacturer warranties, require the car to be serviced at a franchised dealer of that manufacturer throughout the period of the warranty for the warranty to remain valid. Most manufacturers' warranties do not impose such a restriction.

In practice, the vast majority of such consumers, who wish to ensure that their warranty remains valid and to secure peace of mind against their car failing, are effectively restricted.

Announcement of study - see press release.

Back to: Completed market studies