Aussie Motoring

Worthless bits of paper or genuine peace of mind?

by Stuart Livesey

Extended warranties are big money spinners these days. You can get the peace of mind of an extended warranty for just about everything from an office chair to the car you just purchased but peace of mind comes at a cost.

Recently an office supplier offered me an extended warranty on a $150.00 office chair for around $13.00 while a friend bought an extended warranty on his second hard car for around $900.00. But are you really buying peace of mind or are you just throwing money away.

I turned the office chair warranty down; it only kicked in after 12 months and, because of what I do, no office chair lasts longer than 12 months. But my friend thought there was value in his extended warranty and he took it.

Sadly now he’s finding out that it was really just a total waste of money.

The first time he tried to claim on his warranty was when a front shock absorber needed replacing. Now we all know that shock absorbers should be replaced in pairs so you would think that the warranty would cover the replacement of both … and you would be mistaken.

Not only did the warranty not cover the replacement of both shock absorbers but the company made it plain to my friend that he would have no claim on the warranty when the second shock absorber did finally fail because he hadn’t replaced it at the same time as the first one and so added strain would have been placed on it. That added strain, according to the warranty company, would be the fault of my friend - because he only replaced one shock absorber - and that was something not covered by the warranty.

But wait, there’s more. My friend lives up the coast in Queensland while the warranty company has their offices in Sydney. Things cost more up here because there are shipping costs and the warranty company wasn’t having any of that.

They pay their claims based on what they could buy the parts for in Sydney … not what they cost where their client happens to reside. Of course they’re also going to shop around for the best price while anyone who lives outside of a capital city is going to be limited in where they can buy genuine parts.

That same scenario has been repeated for my friend on two more occasions and now he doesn’t even bother lodging a claim when something goes wrong with his car.

So think carefully and be sure to read the fine print before accepting the next extended warranty offer made to you by a smiling salesman. The only people likely to benefit from that warranty is the company who provides the warranty and the salesman who convinces you that you need it.

Here in Australia July was a great month for car sales but over in America things were quite different. Most brands, even imported brands, suffered some serious losses.

General Motors sales were down 22%, Ford dropped 19%, Chrysler fell 9% and Honda and Toyota fell 7%. Unsold inventory is becoming a major headache once again and General Motors is offering interest free loans to try and encourage consumers to come back to their brands.

Unfortunately for the American manufacturers people who are buying aren’t buying what they’re selling. The rising price of petrol is biting into SUV market, the dismal property market is impacting on the sales of pickup trucks and even sales of American small cars is nothing to get excited about.

It seems that after ignoring the small car market for so long the American manufacturers can’t win back consumers who think of Toyota, Honda and Mazda when they’re thinking of small cars.

Even quality products like the Chevy Cobalt just aren’t finding favour with new car buyers in the States.

Family car buyers have helped the Australian motor vehicle market continue its record run, according to figures released yesterday by the Federal Chamber of Automotive Industries (FCAI).

VFACTS figures for July show that a record 86,291 cars, trucks and buses were sold last month – up 8729 vehicles or 11.3 per cent on the same month last year.

While most segments of the market enjoyed growth, the strongest additional sales volume occurred in the family-oriented segments of Large cars, Medium cars and Compact SUVs.

FCAI Chief Executive Andrew McKellar said sales growth in 2007 was more widely spread amongst the segments.

“In 2006 the dynamics of the automotive market were dominated by small and light car sales but this year the sales action has been more broadly based – and the July results reinforce that trend,” said Mr McKellar.

Large car sales rose by 1945 vehicles or 18.6 per cent, Medium car sales increased by 1323 or 21.7 per cent and SUV Compact sales were up 1468 or 23.7 per cent.

In comparison the largest single segment of the motor vehicle market – Small cars – rose by 396 vehicles of 3.9 per cent in July.

So far this year the market total of 610,667 vehicles is running ahead of the same period in 2006 by 8.9 per cent. The FCAI is forecasting record total sales for the calendar year of more than one million vehicles.

Andrew McKellar says that while the continued buoyancy in vehicle sales is pleasing, he sounds a slight note of caution about emerging economic challenges in the months ahead.

“While the overall strength of the market in July is a tremendous result and we are on track for record annual sales, we shouldn’t take the strength of the motor vehicle market for granted,” said Mr McKellar.

“In particular, there is nothing in these sales figures that in any way supports the case for an interest rate increase in the coming months.

“There is no evidence of excess demand in the motor vehicle market. Supply has responded strongly to meet consumer demand, competition is intense and vehicle affordability is at record levels.”

Toyota was the best-selling brand in July with 19,047, ahead of Holden (12,343) and Ford (9006).

Year-to-date Toyota leads with 22.2 per cent share of the market ahead of Holden (14.5 per cent) and Ford (10.4 per cent).

Mazda (7.5 per cent), Mitsubishi (6.4), Nissan (6.0) and Honda (6.0) have all gained market share over the same period of last year.

Well at the moment they’re all owned by Ford … but Ford would like to sell them … if they can find a buyer.

On paper Volvo is probably the marque that’s got the most appeal to prospective purchasers but the reality is that Volvo isn’t doing quite so well as it appears to be on paper.

And who would want to buy Land Rover and Jaguar? There are the usual bunch of private equity groups trying to grab both companies but there are also two possible contenders that come as a bit of a surprise. Industry experts suggest that two Indian car manufacturer are very interested in buying both Land Rover and Jaguar.

The two companies are Tata motors and the Mahindra group. Both are major players in the booming Indian market and both have tried to break into the Australian market … without much success..

Mahindra is a major manufacturer of low-cost motor vehicles including a 2WD and 4WD utility similar to a Toyota Hilux. The ute was to be exhibited at the Orange National Field Days last year and Tynan Motors had been appointed as the importer and distributor.

The plan was for the first shipment of Mahindra utes to hit the showrooms around the middle of this year but that doesn’t seem to have happened and Mahindra is not listed on the Tynan Motors website.

Tata Motors is also a major player in the Indian automotive scene. They produce a wide range of vehicles for the private and commercial sectors. Tata Motors first tested the Australian market four years ago and could be back in the Australian market later this year but experts are not hopeful of Tata having any more success than they did four years ago.

You can read more about Tata, Mahindra and the Australian market here

But will either company be able to make turn around the fortunes of Land Rover and Jaguar? Overseas experts describe both Ford subsidiaries as ‘basket cases’ so it will be interesting to see what lies ahead.