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Unsuspecting drivers are 'ripped off' on warranties

Franchised dealer prices for warranties can cost nearly three times as much as an independent insurer, according to new research.

Research shows that franchised dealers charged an average of £614 for a 12-month extended policy while the equivalent cover from an independent insurer costs £239 – a difference of £375. The biggest gulf was on a Jaguar S-type V6 SE auto with one dealer asking £1,014 for a one-year extension compared to £239 from an independent insurer.

Duncan McClure Fisher, Warranty Direct, said: “This is another example of franchised dealers ripping off unsuspecting motorists. Not only do they get away with premium labour rates, but they charge over inflated prices for extended warranties.”

For example, a dealer premium for a Vauxhall Vectra 1.8 SXI 16 costs on average £395 compared to £251.66 from independent insurer Warranty Direct. And a warranty for a Volkswagen Golf 1.6 SE highlighted a £150 difference.

Motorists seeking additional cover may also have to pay for an inspection before the franchised dealer agrees to sell a warranty. The report found that some dealers quoted fees up to £176 for this check up. However, Alan Pulham, director of the RMI's franchised dealer division, says: “Warranties are like any consumer goods – some are more expensive than others.”

Figures show two out of five cars suffer mechanical failure in the two years' after the manufacturer's warranty has expired. The average cost of repair is £308.71 with many drivers in Britain spending £8.4bn a year on service and repair for cars aged three years and older. Suspension failure accounts for one in four claims for vehicles aged three and four years old. Typical repair costs are £273 but this can run up to £1,800. Engine failure, the second most common problem, costs on average £660.85 to fix.

The news comes after the Office of Fair Trading announced plans for a nationwide advertising campaign to help non-franchised outlets win a greater share of the new car servicing market.

Independent outlets have less than 10% of the servicing and repair market for cars up to three years old. But research suggests that following the introduction of three-year warranties, franchised dealers have been able to increase their share of service work to more than 40%.

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