Vehicle repairs can break the bank - How to protect your budget

Unforeseen car repairs can be a major financial blow, especially if you're caught without the right cover. Labour rates at franchised dealerships in South Africa can range from R800 to R1,500 per hour, and parts are often imported, making them even more expensive.  

Replacing brake pads can cost R2,000 to R3,500 on a mid-range car, while a clutch replacement on a hatchback may reach R10,000. Fixing a turbocharger or gearbox  on a premium vehicle could cost R50,000 or more.

“Most South Africans are already under financial pressure, so unexpected vehicle repair costs can wreak havoc on a household budget,” says Sarah Nicholson, platform and customer experience manager of JustMoney.co.za, a platform that helps South Africans make good money choices.

“That’s why it’s essential to understand what protection you're getting when buying a vehicle, and to be clear on the difference between a motor plan and a motor warranty. Although these terms are often used interchangeably, they provide different types of cover.”

What is a motor plan?

A motor plan helps you manage the cost of keeping your car in good running condition. It may include a service plan, a maintenance plan, or both.

• Service plan. Covers the cost of routine servicing according to the manufacturer’s schedule. This includes labour and parts such as oil, brake fluid, and spark plugs. Some items are replaced automatically, while others are inspected and only replaced if necessary.
• Maintenance plan. Includes everything in a service plan, plus the replacement of parts that wear out over time, like brake pads, the clutch, and the battery, as well as mechanical and electrical failure.

What is a motor warranty?

A motor warranty, also called a factory or manufacturer warranty, is included automatically with a new car. It usually lasts for a fixed period, such as three to five years, or up to a certain mileage such as 100,000km, 120,000km or 200,000km in some instances.

It covers unexpected mechanical or electrical failures in key components like the engine, gearbox, and onboard electronics. If a part fails suddenly due to a manufacturing fault, the warranty pays for repairs or replacement.

However, if a part wears out over time, like a clutch or battery, it won’t be covered by a warranty, only by a maintenance plan.

“Many new cars come with both a motor plan and a warranty bundled together. When something goes wrong, it’s often the warranty that covers the cost, but drivers mistakenly credit the motor plan. This causes confusion about what each plan really includes,” explains Nicholson.

Normal car insurance is different from both a motor plan and a warranty, adds Nicholson. This covers you for accidental damage, theft, fire, and third-party claims. While a motor plan pays for scheduled services and a warranty covers mechanical or electrical failures, insurance covers you if your vehicle is involved in an accident or is stolen.

Insurance is a legal requirement if you have a financed vehicle, and choosing the right level of cover is crucial for protecting your budget.

Options when cover expires

Once your motor plan and warranty expire, you have several options to stay protected against high service and repair costs.

1. Buy an extended warranty. This covers mechanical and electrical failures beyond the original warranty period. You can buy it from the vehicle manufacturer, dealership, or a third-party provider. Always check what's included, as some plans exclude high-cost items or wear-and-tear.
2. Purchase a service or maintenance plan. These plans help you budget for routine servicing or wear-and-tear items like brake pads, filters, and wiper blades. They can be bought for specific timeframes or mileage limits and vary in what they cover.
3. Pay out of pocket. You can pay for all services and repairs as they arise. This gives flexibility but leaves you exposed to sudden, potentially large expenses.
4. Self-insure. Set aside money each month in a dedicated savings account to cover future car costs. This requires discipline, but saves you from paying for plans you may not fully use.
5. Trade in or sell your car. If your car is likely to start incurring high repair costs, you could choose to sell or trade it in while it still has decent resale value.

Choosing the right option after your motor plan or warranty expires depends on your car’s age, your driving habits, and your financial situation, says Nicholson. If your vehicle is still in good condition but you want peace of mind, an extended warranty may be worth considering.

The cost of extending a motor or maintenance plan varies depending on the vehicle brand. For example, an extended maintenance plan could cost in excess of R60,000 for two years/40,000km cover on high-end vehicles, whereas the average cost typically ranges between R15,000 and R30,000.

If you clock up high mileage or drive in tough conditions, and want to avoid surprise service costs, a service or maintenance plan can help you budget more predictably.

On the other hand, if you have a solid emergency fund and the discipline to save regularly, self-insuring could be the most flexible and cost-effective route. For some, simply paying out of pocket as needed, or trading in the car before major repairs arise, makes the most financial sense.

“Read the fine print when considering your options, and make sure you understand what’s covered and excluded,” concludes Nicholson. “The option you choose must suit both your car and your budget.”

www.JustMoney.co.za is a trusted voice within the personal finance sector, helping consumers make good money choices. The JustMoney platform offers personalised insights, numerous articles, and a range of financial solutions and tools, including a free credit score. Register here.