New car warranties

Launched: June 2003

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Purpose of the study

To investigate how competition in car servicing is affected by restrictions on where cars may be serviced during the warranty term. To examine:

1. The extent to which garages outside the manufacturers' networks are prevented from servicing new cars.

2. Whether competition from independent extended warranty providers is being eliminated.

3. The impact on consumers of restrictions on where vehicles should be serviced.

(Study followed in-house work)

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Findings

The findings showed:

1. 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.

2. Widespread confusion among consumers about the terms attached to their warranties, with most believing they must have their car serviced at a franchised dealer for the warranty to remain valid, when this is not necessarily the case.

3. 'Dealer-based extended warranties' offered by many manufacturers included terms requiring that new cars be serviced at a garage belonging to the manufacturer's franchised dealer network, limiting consumers' ability to choose where to have their car serviced.

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

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Recommendations

The recommendations of the study were that manufacturers and dealers should:

1. Improve their advice to consumers on their options for servicing new and nearly-new cars and their statutory rights and
2. 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.

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Action following market study

In Spring 2004:

• OFT launched 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. This included leaflets 'Buying a new car?' and 'How to get a better deal from your garage'.
  
• OFT issued business guidance to motor dealers and others in the car trade on the advice they should be providing to customers about servicing requirements
  
• OFT worked with motor trade associations on developing effective consumer codes of practice
  
• OFT approved Society of Motor Manufacturers and Traders Code of Practice.

All major makes of new car in the UK were to be sold without servicing ties as part of their warranties. The remaining manufacturers whose new car warranties included servicing ties lifted their servicing restrictions.

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Market study details and report

Download the OFT Report 'New car warranties' December 2003 (pdf file 398 kb)

Download 'Car warranty survey'  December 2003 (pdf file 469 kb)

See press release 'More freedom of choice needed in car after-sales market: OFT recommend lifting servicing ties'. 17 December 2003

See  press release 'Driving competition in the car after-sales market: check terms and conditions on new car warranties, says OFT' 30 March 2004

See press release 'Servicing ties removed from new car warranties: OFT action gets greater choice for consumers over new car servicing' 14 May 2004

See press release 'OFT action secures consumer gains in car after-sales market'  27 June 2006

Download 'Evaluating the impact of the car warranties market study'  June 2006 (pdf file 554 kb)

See Car warranties - what to ask for before you buy 'Buying a new car?'  June 2006 (pdf file 267 kb)

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Background information

Announcement of study - see press release 'OFT launches study into new cars warranties' 30 June 2003

Back to: Completed market studies