Last year, the Finnish car dealership Delta Auto was marketing its new cars by promising a longer warranty period than ever before, 5 years. The warranty terms, however, included a requirement to have car maintenance performed only at approved garages.
The Finnish Consumer Agency objected to the terms of the warranty because according to the Consumer Protection Act, a warranty should be an added benefit for which a consumer does not incur any additional obligation. Aside from being unreasonable, the proposed warranty would have been anticompetitive. A consumer must be able to make choices without committing to certain services for a long period of time.
The model warranty terms prepared by the Consumer Ombudsman together with representatives of the car industry are in line with EU policy, which states that a car manufacturer cannot limit a warranty by pre-determining where periodic maintenance should take place. The goal of this "group exemption regulation" has been to open up competition so that more garages can perform periodic maintenance without any impact on the warranty granted to the consumer.
The regulation specifically concerns car manufacturers. Other warranty providers, such as car dealerships, are evaluated on the basis of the Consumer Protection Act. One of its basic principles is that a warranty should be an added benefit for which a consumer does not incur any additional obligation.
A maintenance agreement is more fair than a binding warranty
The requirement that a warranty may not impose an obligation does not mean it must be completely free of charge, if the product is such that periodically recurring expenses are to be expected. Naturally, regardless of any warranty period, a consumer who is purchasing a car should know that proper use of the car entails periodic maintenance done by a professional. In evaluating whether warranty terms are reasonable, however, a significant factor is whether the consumer is obliged to use the services of a particular provider. A warranty contract must not limit the consumer's right to choose a suitable garage with attractive rates.
There are also various kinds of maintenance agreements that involve the consumer paying a certain monthly instalment, for example, in exchange for all necessary maintenance performed on the vehicle. These maintenance agreements are priced clearly and openly, and cannot be considered warranties since the consumer pays for them. In theory, though, this amounts to the same thing as requiring approved garages to be used: the consumer pays a certain amount to a certain supplier, who sees to it that the car continues to function properly. From a marketing viewpoint, however, a maintenance agreement is more transparent because the customer can predict the expenses to be incurred over the years of the agreement. A warranty agreement involving a designated garage, on the other hand, means that the customer is tied to a particular service provider without necessarily knowing how much it will cost.
A long warranty period as a marketing tool
The new cars sold by Delta Auto came with a regular manufacturer warranty, two years, for example, to be followed by an extended warranty if the consumer were to use the Delta-approved garages. The extended warranty was used in marketing to sell new cars. Warranties are known to be a good marketing tool, but in order to secure the consumer's freedom to choose in a case such as this, all terms of sale should be easy to compare, that is, transparent. In the warranty offered by this company, the consumer was certainly free to "cancel" the agreement at any time by using his or her garage of choice. This would always be a choice occurring after the time of purchase, however, and does not make up for the fact that at one time, the long warranty period might have had quite a large impact on the consumer's purchase decision.
Car importers or representatives of particular brands have the right to advertise and recommend certain garages for their expertise in performing periodic maintenance with attention to consumer safety, but the right to have such maintenance done cannot be limited by warranty terms. Delta Auto has changed its marketing approach by no longer using the term "warranty" in reference to the services offered to consumers. It now uses the term "maintenance security".