The truth about car servicing costs

Cars are like home computer printers: manufacturers and dealers make most of their money after a car has been delivered.

Mitsubishi marketing boss Tony Principe recently told Drive that some brands were happy to sell cars for profits of less than $100 as they could make much more in parts, servicing, and repeat business.

Deloitte consultants agree, telling dealers in annual reports that parts and servicing provide a stable income, playing “a vital role in helping to offset the profitability drain commonly experienced in the (new and used) vehicle departments”.

That research suggests that servicing brings in twice as much money as new vehicle sales at a dealership level.

Fierce competition has made some cars more accessible than ever, but the pressure is on dealerships to stay afloat through selling finance, insurance and parts and servicing.

Why do it?

Cars are extremely complex items often operating in difficult temperatures or conditions, so they require ongoing care. That's even more important as engineering tolerances tighten and car makers inject new technology to improve efficiency.

Without regular oil changes (oil loses its lubricating properties over time), an engine may seize or degenerate prematurely, preventing a car from fulfilling its basic role as transport. It's particularly important for some of the new turbocharged engines.

Consumable items such as tyres and brakes are designed to deteriorate with use, and can be dangerous without proper attention.

With most car makers stretching services intervals - to as much as 15,000km, which is triple the accepted norm a couple of decades ago - there's also more pressure to ensure you get the car looked at when it's required rather than pushing it a little further.

The benefits to regular servicing far outweigh the downsides, which mostly boil down to cost and convenience.

A well-maintained car should last longer, run smoother and be safer.

It also should be worth more than other examples when sold, as many second-hand buyers have a look at service records before signing off on a purchase. Another key element surrounds vehicle warranties, which are extremely valuable to consumers. New vehicle warranties are essentially an agreement that a manufacturer will ensure that a car remains operational for a set distance or period, as long as customers live up to their end of the bargain by having the car properly maintained.

Factory recommendations

If the prime benefit of maintenance is a car that will get you from A to B, the next best thing has to be the promise that it will do it again tomorrow. Manufacturers guarantee that their cars will not experience failures for a reasonable period of time, usually between three and five years from the date of sale. But customers can break their part of the deal by failing to have a car properly maintained.

Manufacturers set out recommendations for servicing, parts and procedures that are often listed in a car’s handbook or published online. Owners may void their warranty by deferring maintenance seen as critical to the proper running of their car.

Maintenance intervals are set by manufacturers after decades of experience and millions of kilometres in testing. They know how far an engine can be pushed before suffering major damage, and set service requirements to protect it.

Frustratingly for consumers, manufacturers do not agree as to what service intervals are correct - sometimes even those using exactly the same engine.

Some manufacturers, such as Hyundai and Ford, require cars to be serviced every 12 months, while others including Honda and Subaru, ask that vehicles are maintained twice as often.

In Subaru’s case, the first six services over three years cost Impreza owners more than $2200, while Hyundai’s equivalent i30 or Elantra costs $657 in the same period. This disparity can frustrate owners, particularly when identical cars in foreign markets have less stringent service schemes. A spokeswoman for Honda Australia could not say why cars such as the CR-V need to be serviced every six months in Australia, while the same cars have 12-month intervals in the UK.

Independent alternatives

New car buyers must have their vehicle serviced in order to maintain a warranty with the manufacturer, but - despite what your owner's manual might say - there is no requirement to have servicing completed through official dealerships.

The ACCC issued a statement in 2014 clarifying myths surrounding warranties and third-party service providers such as Ultratune, K-mart Tyre and Auto or all manner of independent mechanics.

A spokesman for the commission says manufacturer warranties remain valid as long as conditions in user agreements are adhered to, and that any suggestion that licensed mechanics could void a manufacturer warranty were “likely to raise concerns” with the consumer authority.

Stuart Charity, executive director Australian Automotive Aftermarket Association, welcomed the ACCC’s clarification.

“Over many years, car manufacturers and their dealers have promulgated the myth to car owners that they risk voiding their warranty unless their car is serviced by an authorised dealer using parts supplied by the vehicle maker during the warranty period,” he says.

“The reality is that consumers have always had statutory rights under Australian law to ensure that their manufacturers’ warranties remain valid when the vehicles are serviced by independent workshops using fit for purpose parts and qualified technicians."

But there are caveats to having your car serviced through independent workshops. Sometimes manufacturers may repair a just-failed component as an act of good faith if you've had the car serviced with one of their outlets from day one. And on some cars - particularly luxury or sports models - there are times when having it serviced by the manufacturer's agent could bode better come resale time.

Manufacturers also often instigate a "service campaign" which is similar to a recall but it is not safety related. It may be a known fault with the sound system, a software update or a piece of trim that needs replacing. They're the sorts of things that will be fixed at the next service rather than as soon as possible, as is the case with a safety recall. By going elsewhere regularly you may miss these updates, something more likely to impact near-new cars.

Extended warranties, often provided by individual dealerships as opposed to the car’s manufacturer, may also be voided by third-party servicing. The ACCC says third-party service providers to be wary of extended warranties.

“A common requirement of these warranties is that the vehicle must be serviced by the dealer offering the warranty,” it said.

“If this is a requirement of a dealer’s extended warranty, an independent repairer will void the warranty if they service the vehicle.”

While the extended warranty may seem tempting initially, the subsequent servicing costs can make it far less appealing, so check the fine print. 

Home mechanics should also take note of the fine print in their new car’s warranty. Many agreements specifically require qualified mechanics to perform maintenance work, and it is possible that anything more than topping up a car’s fluids could be doing more harm than good.

It pays to read the terms and conditions provided by a manufacturer when purchasing a new car, and may be pertinent to have important questions rectified by the brand’s customer service arm in writing as opposed to verbal promises from sales staff.

Under Australian consumer law, customers can ask repairers to service their car using parts they have provided, but repairers are allowed to refuse to use those parts at their discretion, particularly if the parts concerned are not of appropriate quality.

Dealerships are likely to use genuine parts when servicing cars, something that may not be the case at independent outlets as replica components are often far cheaper – and in many cases, just as capable – as genuine components.

There is a trap for consumers surrounding non-genuine parts as warranty claims may be denied due to unapproved components.

The ACCC says a manufacturer’s warranty may set out requirements that consumers must comply with, including that servicing is carried out using appropriate quality parts.

“If this is a requirement of a warranty, a consumer risks voiding their warranty if parts of appropriate quality are not used to service their vehicle,” it says.

Capped price servicing

Capped price servicing has been an important tool for manufacturers and dealers in recent years. There are two purposes to the programs, firstly to make cars more attractive at the time of purchase, and secondly to encourage buyers to keep coming back to the factory dealer for maintenance, improving profits and delivering a healthy supply of potential customers to dealerships.

Deloitte research suggests capped price servicing schemes are “strategic initiatives to keep customers in the franchise dealership loop” and that the system robs Peter to pay Paul in terms of profitability, by narrowing once-thick margins enjoyed by service departments.

But not all service schemes are equal.

Capped price servicing arrangements vary wildly in length. For the most part, Hyundai’s capped price program includes prices for just three services over the first three years of ownership. Subaru, however, has published capped price servicing for the life of cars built since 2006. The prices are subject to change, but the system will allow owners to look at costs online that will apply to their car regardless of where it is serviced.

At an average of $371 per service for its Impreza small car, the Japanese manufacturer’s prices are higher than most of its rivals from Ford, Toyota, Holden and Hyundai. Subaru Australia boss Nick Senior says its scheme goes beyond parts and labour costs to include environmental levies and oil recycling charges.

“Many other car companies exclude some of these items from their Capped Price for the standard scheduled service,” he says.

“So when considering these programs, be sure that you are comparing apples with apples”.

Consumables such as tyres, windscreen wipers, air filters and brake pads are designed to be replaced, but the cost of replacement is generally not factored into service arrangements.

Toyota says it will not cover consumable parts or additional services that may be required, such as a wheel alignment, accident repair or work that a result of severe operating conditions.

Upselling

Motorists are often asked to consider further services during a regular tune-up. Many of these, such as coolant flush, brake flush, engine additive or cleaning products will not be part of a regular logbook service.

They are not essential in keeping a car on the road, though they may have tangible benefits.

The line between “upselling” and well-advised preventive maintenance can be very thin, and it pays to have a long standing relationship with a trusted mechanic.

From time to time, mechanics may perform services that were not part of a vehicle’s maintenance plan or an agreement with customers.

This is illegal under Australian consumer law, and considered as “unsolicited supplies” by the ACCC. Businesses must not request that customers pay for work they did not agree to, and must refund any payments made for those services.

Consumers are also protected by law if a product is not fit for purpose. Civil courts can rule that businesses have failed to provide appropriate goods or services, which in extreme cases gives buyers an opportunity to choose a refund or replacement vehicle, or be compensated for a loss in value caused by major technical failures.

Going the extra mile

Competition between car makers and dealer networks has pushed service providers to go further in order to keep customers happy. TV monitors and coffee machines have been joined by wireless internet, lounge environments and children’s play zones that make waiting bearable.

Luxury car makers generally offer the best services. Lexus collects and drops off customer cars while they are at work, and Audi’s corporate program offers similar features. But the most impressive service has to go to Mercedes-Benz, which has helicopter transfers between Melbourne airport and the CBD for well-heeled VIP customers. Mercedes-Benz express services at other major airports effectively give customers free parking for the day while having their car serviced, along with a pickup and delivery service to their terminal of choice.