January 16th, 2020 at 10:11 am
Never wanting to miss a trick to upsell your latest car, new or used, most dealers will offer you a service plan as part of the available package with your new car. So, should you opt for it or are they an unnecessary waste of money?
Service costs particularly if you are under warranty and feel you have to go back to a dealer are not a pleasant expense. So the prospect of rolling up all your services into a package and paying one lower fixed monthly cost which you might be able to add to your car finance payment, does seem to make perfect sense. It ties down your motoring costs and reduces the likelihood of large, one-off bills which can be very attractive if you are on a budget. Prices are set at the point you buy the plan so if labour and parts’ costs increase, then you won’t have to pay the uplift, another incentive as sometimes service plans can run for several years so charges are bound to go up over time.
Other advantages to a dealer service plan
All the services are carried out at a main dealer using genuine parts as required and the reassuring set of dealer stamps in your vehicle’s service booklet can carry some real currency when it is time to part company with your car.
What is the cost of a service plan?
The plans cost roughly the amount of the actual service charges so if you have an annual service due on your car and you want a four-year plan, multiply the service cost by 4 and then divide by 12 and you won’t be far off the monthly payment.
The plans reflect the actual cost of servicing your vehicle so a small car is going to cost less in terms of the plan than say a large, luxury 4×4. Service costs reflect engine size, model and fuel type and are tailored to the length of time you want the plan to run. So, a smaller, basic car with an annual service might cost somewhere in the region of £100 per year but a more expensive car could be well in excess of £1,000 but that may include several years’ worth of service costs. However you want to pay for it, a bigger more expensive car will always cost more to service than a cheaper more basic model.
Servicing your car at a main dealership is expensive, much more expensive than a local garage so you could explore the options of servicing elsewhere if you are not actually required to use a dealership to service the vehicle. Under the European Commission Block Exemption Regulation, since 2003, motorists can now opt to have their vehicle serviced or repaired at a garage of their own choosing without invalidating the manufacturer’s warranty. Prior to 2003, you could possibly invalidate the warranty by opting to stray outside the local dealer’s control (and high prices). In 2010, Block Exemption Regulations 461/2010 came into being and this offered the motorist even more freedom in deciding who will service or repair their car regardless of whether the vehicle is within warranty or not. The main aim of this ruling was to open up the manufacturer’s monopoly via their dealerships on exclusive information commonly surrounding electronic diagnostics which meant that local garages could not have access to certain key information to repair or service a car.
Local garages are a fraction of the cost and can be more flexible and available than a large dealership which might not be that convenient to your home or work location. A good local garage will help you out in a tight fix and can be worth their weight in gold. You won’t have the main dealership stamp in your service booklet but that may not matter to you and a local garage can still use genuine manufacturer’s parts for repairs and replacements. You can also now use ungenuine, non-manufacturer’s parts during repair or service but they must be commensurate in quality to the real thing or this could form a possible point of dispute under a warranty claim. If you don’t know a good local garage then ask a friend or family member, or put a post on social media or, you could try the Good Garage Scheme.
Read the small print
A lower monthly cost on a service plan can seem like a good idea at the time but do read the small print carefully. Your overall bills and therefore the cost of your plan is almost always bound to be higher than if you go locally to service the vehicle although a small garage probably won’t be able to offer you the ease and convenience of a service plan.
Some dealership service plans only cover basic maintenance like oil and filter changes so you may still end up with a bill as well as the monthly cost of the service plan. Find out what the proposed service plan actually covers, it should cover the service in its entirety, unforeseen repairs are clearly another issue. You may find you actually have to opt for a higher level of service plan if you want to cover replacing components such as brake pads.
Monitor the service carefully
When the car is serviced by the dealer they may discover other work which needs attention and this will not form part of the service plan cost and you could, therefore, expose yourself to high labour charges, paying premium dealer rates. You can hive off any additional work over and above the main service and use a different garage to complete this, usually at a fraction of the cost.
Why do dealerships offer service plans?
Motor dealers rarely make money on service plans but their intention is to keep your custom, get you back on site and perhaps pick up other unforeseen repair work that your vehicle might need. Service plans are a really good option for some motorists but as with all these things, you need to read the small print carefully and look closely at the real cost.