Should I buy a used car without a warranty?

Buying a used car can feel like dancing along a treacherous shore, tempted on each side by the devil (the cliched view of unscrupulous used-car dealers) and the deep blue sea (the great unknown, and great unwashed, of the private market).

BUYING PRIVATELY

Buying privately will almost certainly save you money, right here and right now, which presents a powerful temptation, but it's important to think longer term and not to get your Latin terms mixed up - carpe diem (seize the day) sounds great in Dead Poet's Society, but caveat emptor (let the buyer beware) should be your watch words.

WHAT THE LAW SAYS

But the one word you need to consider most seriously of all is "warranty", which, in the past, was very rarely available when buying privately, but guaranteed under law if you bought from a dealer. 

Buying a car without warranty or a buying a used car with no warranty is clearly something you’d never want to do, but thankfully a large number of car companies are now offering vastly extended warranties - something that has changed the playing field, because you can now buy a second-hand car that’s still effectively under a new-car warranty.

Jack Haley, senior policy adviser on vehicles and environment for the NRMA, says retail buyers are protected by Australian Consumer Law, no matter how cheap the car they buy is, and regardless of whether it's new or second hand. 

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"The law says one year, nominally, but really it demands that products be of merchantable quality, particularly expensive products like cars, so really your car should last a number of years without a problem and if it doesn't you should be covered," he explains.

"Most car companies offer three-year warranties on new cars, as a minimum, and that essentially means that if something goes wrong with the car you don't have to pay, excluding items that are subject to wear and tear or limited life - tyres, brake pads and things that do wear out.

"Of course some second-hand dealers will tell you they're offering you a one-year warranty as a way to sweeten the deal, but all they're really doing is obeying the law.”

BEST MANUFACTURER WARRANTIES

The exciting thing about the extended, unlimited kilometre warranties now on offer - including five years of coverage on Citroens, five years on Hyundais, Renaults, six years for Isuzu (with a 150,000km limit) and seven years from Kia, is that they carry over when the car is sold on second hand. 

The absolute best used car warranty in Australia at the moment, though, comes from Mitsubishi, which offers a game-changing 10-year/200,000km extended new car warranty. 

There are, however, conditions: to be eligible you must have had all of your scheduled services done through the authorised Mitsubishi Motors Dealer Network, and some customers such as government, taxis, rentals and selected national businesses are excluded.

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If that’s not something you want to do, you’ll still receive Mitsubishi’s five-year/100,000 km standard new-car warranty, subject to the vehicle being serviced in accordance with the service schedule. 

A Kia spokesman said its company's offer had done a huge amount to increase the residual values of its cars. 

"We offer not just a seven-year warranty but seven years of fixed-price serving and up to eight years of roadside assistance and, as long as the previous owner has had the car serviced by someone registered and they've only used OEM (Original Equipment Manufacturer) parts, then absolutely the warranty period transfers to the second, or even third or fourth, owner," he says.

"So you're looking at cars that come out of a typical three-year lease period coming up for sale second-hand, and they're still offering more warranty coverage than some new cars.”

LONGER WARRANTIES MEAN BETTER USED BUYING

Haley says the extended warranties have shifted the playing field in favour of second-hand buyers after a used car warranty. "In the past you would have been hard pressed to buy a second-hand car with that kind of warranty, and when you look at the fact that the typical turnover for a new car is between two and four years, you can see you'd be doing well out of it," he says.

"These offers really demonstrate a lot of confidence from these brands in their products, because they've obviously done the cost/benefit sums and decided that it won't cost them more in warranty claims than the benefit it gives them in sales.”

IS NO WARRANTY WORTH THE RISK?

A second-hand car warranty usually means the vehicle will be more expensive, of course, so what if you still want to chase a bargain, and forgo the factory coverage? One thing to keep in mind is the kilometres on the clock. International roadworthiness research shows that once a car is more than six years/100,000km old, you can expect major items to need attention.

It's also always better to buy a car that has a solid service history, because you can track what's gone wrong and how it's been dealt with. Or, as Mr Haley says, you can gamble if you like.

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"It comes down to level of risk, if you find a vehicle that seems well kept you might want to take the punt that it's been serviced, just not by a dealer, or the owners hasn't kept the records," he says. 

"The payoff is you might get a lower price, or higher level of specification, that's your judgment call to make, but generally we recommend buying with a service history.”

WHICH BRANDS ARE BEST USED?

In terms of which brands to look for second-hand, Mr Haley recommends examining the JD Power Vehicle Dependability ratings, which are released annually in America and give a stark, no-nonsense report on how often cars from particular brands break down.

Lexus was the most reliable marque by far in the most recent survey, followed by Porsche, Kia and Toyota, while BMW, Hyundai, Mitsubishi and Mazda all fared better than the industry average. The worst-performing brands included Alfa Romeo, Land Rover, Honda and, perhaps surprisingly, Volkswagen and Volvo.

VERDICT

In summary, then, you're probably best served looking for a second-hand car that comes with a warranty someone else paid for. Or else jump in the deep blue sea, with your eyes wide open.