Demystifying warranties and service contracts

What happens with a vehicle’s warranty and service or maintenance contract when it is sold on? 

To begin with, it is important to distinguish between the concepts of warranty, service contracts and maintenance contracts. According to Theunis Eloff, director: aftermarket, Volvo Group Market Southern Africa, a warranty is “a promise given to the customer, which gives peace of mind that the manufacturer believes in its product and protects the customer against manufacturing defects in material or faulty workmanship”.

“Service and maintenance is a contractual agreement tailor-made per chassis to secure maximum uptime, scheduled servicing and, in turn, reduced cost of ownership to the customer while improving operational control,” he explains.

For the customer, the benefits are numerous. Trucks can be kept in optimal condition, meaning running costs and downtime are minimised. “Servicing that is planned gives greater operational control and visibility across our customers’ businesses,” Eloff adds.

What happens, though, when an operator wants to buy a used vehicle? Well, the situation is simple in the case of the warranty: it remains in force for the reminder of the stipulated years and mileage conditions and is transferred with the vehicle to the new owner.

Using Volvo as an example, Eloff says that service contracts are available to used-truck buyers, which are tailor-made for the application, topography and road conditions.

“We negotiate a new contract with the buyer, due to the fact that the truck might be used in a different application, with different mileage driven, as well as other dynamics that may differ from its previous role, and may affect its maintenance requirements.

“The time periods of these contracts are dependent on the customer’s replacement cycle, and these can generally be tailored according to customer needs. Generically, we offer a five-year/800 000 km contract, but we have seen a natural tendency to move towards four-year/650 000 km contracts.”

It’s worth noting that extensions are available if customers require them. In this case, the contract is reviewed based on length, service intervals and application. Also, a trend in the industry of late is to offer extended warranties on parts, provided they are fitted by an approved workshop.

The standard here seems to be 24 months, regardless of the age or mileage of the vehicle – whereas simply buying a part and fitting it privately would mean that the usual one-year warranty applies.

Interestingly, Eloff notes that technology is helping vehicle manufacturers to go beyond the standard service or maintenance contract. In this regard, uptime development is a key motivator.

“Modern trucks boast a telematics gateway that gathers a significant amount of data on component wear, mileage and driver behaviour. This information is combined with the vehicle’s telematics system – in Volvo’s case, Dynafleet – which creates value for the customers regarding truck and driver behaviour.

“There is project underway where we will be able to identify faults in the vehicle remotely, diagnose the fault, and call the vehicle in before failure occurs. We are also aiming to take this a step further with remote programming, thus eliminating the need for the vehicle to visit a workshop for basic programming, or new software updates,” Eloff concludes.