BMW responds to warranty critics
M Cars cost more to fix, says Munich firm
BMW M3 CSL: costly to run?
So we asked BMW what it thought of the matter. The response we got broadly confirmed the view that, in the company's eyes, M cars are more costly to fix, so that's why the warranties cost more to buy. This was also the reasoning set out in a letter to a customer a few days ago (see the related story below). Interestingly, BMW also included the issue of financial regulations as another price booster -- although such rules apply equally to all car makers, while BMW's warranty price increases have been compared adversely to those of Porsche.
Here's BMW's response in full:
"BMW has made warranty pricing decisions in light of the new FSA [Financial Services Authority] rules. These rules state that any extended warranty product needs to be regulated. In addition, we now have to apply non-recoverable Insurance Premium Tax and Value Added Tax to all policies. The new regulations also state that we have to involve an insurance company and therefore, as a consequence, we have had to increase extended warranty prices.
"We have taken steps to try and stabilise the costs by introducing an excess payment in the policy. Whilst this is unique to the warranty business, it is not new to the insurance industry and has the effect of helping to keep premiums low, as do the two separate mileage bands.
"Due to their complexity, M series cars cost more to repair than BMWs standard models. As the premiums are now controlled by an insurance underwriter, the cost of each warranty has to be calculated on its claim history and as a result, we have had to adjust prices accordingly.
"It is important to note that our Approved Used Car programme falls outside FSA regulation and any Approved Used Car bought from the BMW dealer network under this scheme will have, included in the screen price, a 12 month unlimited mileage warranty without excess or limits of coverage. It is also important to note that if any reader is considering purchasing a new Porsche, its products only come with a 2-year new car warranty rather than 3-year coverage on a BMW, meaning that an extended warranty would need to be purchased a year earlier."
So there you have it: statistically M cars cost more because they're more complex. While it's hard to draw conclusions from the small subset of the total ownership that's represented here on PistonHeads and elsewhere on forums, the chances are that a more complex product is more likely to fail than a simpler one.
On the other hand, a 46 per cent price increase does suggest some pretty huge failures...
Related PH stories
Ergo, M series are not as reliable as they would like you to believe, and if BMW dealers can warrant a car for a year after purchase, why cant the users extend that warranty at the same cost?
£2k a year for a 3 year old car is a bit steep I reckon.
I think the part about the 2 year warranty on porkies is misleading but i have to say i like the subtle last line!
"On the other hand, a 46 per cent price increase does suggest some pretty huge failures..." This makes it much clearer.
As i've said before i think BMW will lose business over this debacle, speaking to one guy at VMAX, he said he was thinking about selling partly because of it, nice one BMW!!!
mondeoman said:
£2k a year for a 3 year old car is a bit steep I reckon.
Isn't that amazing - BMW conveniently forget that the premium is going up from £720 to £1,868 on most of the M cars.
That is not 46%, that is a staggering 160% increase, and that's without counting the compulsary excess of £250 per claim.
And if that was not enough, BMW turn the knife and exclude MOT cover, power steering, suspension.
Dear BMW - please sub-contract your engineering work to Porsche or even Hyundai (5 years manufacturer's warranty)
Goodnight Munich
mondeoman said:
How many parts are exclusive to M series - heaters? Aircon? Stereo?
satnav? basic electronic systems?electric seats? are they more
complex? No.
True, but on the other hand of only 50% of the car is more expensive
[ engine, brakes & suspension spring to mind ] by 50%, then that's
still a 25% total increase.
And, as the article makes clear, there is the delight of the extra
insurance tax from Gordon Brown. Blame him for that next time you vote.
mondeoman said:
£2k a year for a 3 year old car is a bit steep I reckon.
Me too. There are still the non M cars for those with less deep
pockets. I've got a 330 lined up for my next one. I won't need
the extra the M3 provides.
BMW said:
"M cars are more costly to fix, so that's why the warranties cost more to buy."
they cost significantly more to buy in the first instance and seeing that 90% of the parts are probably the same as the basic models, I would have thought that should be sufficient to cover the warranty?£1,000 limit for £400 approx
£2,500 limit for £900 approx
Not that bad is it? Thats just a quick trawl - and no, I dont work for warrantyworks.... looks quite interesting though! They do cover for E34's
off_again said:
What about specialist warranties? A quick trawl of the web came up with a company called WarrantyWorks ( www.warrantyworks.co.uk ) who will do a less than 5 year old M5 with less than 100,000 miles:
£1,000 limit for £400 approx
£2,500 limit for £900 approx
Not that bad is it? Thats just a quick trawl - and no, I dont work for warrantyworks.... looks quite interesting though! They do cover for E34's
I have my S3 warranty with them. Pretty comprehensive cover for 3 years but I've heard some good and some very bad things about dealing with them over a claim.
Probably no worse than BMW then.
there is nothing in there to go wrong
no sat nav no fancy radio no heated elecrtic seat etc.
All we have is a body and a big engine, and on top of that no CSL engine has even gone bang.
BMW suck eggs and are the only company with an excess on a warranty.
This can only lose them sales and make the second hand market prices fall.
And in a year when BMW have got record profits.
havoc said:
And in a year when BMW have got record profits.
Yep, the directors/shareholders are showing who's in charge...and it's not the customers or the engineers!!!
And that is what this is all about, is it not?
BMW consider a car a consumable that you dispose of after 3 years, and therefore engineer it accordingly (and therefore shy away from providing a warranty at sensible prices).
Now all we need is a BMW official to make a joke in public that their cars are 'crap' and should not be expected to last more than 3 years without needing a lot of repairs.
If the warranty insurance if effectively outsourced, they should reduce list price accordingly, since they no longer carry the burden.
Or have I misunderstood?
John
lathamjohnp said:
Presumably this means that previously BMW were self-insuring, and taking a hit, which they absorbed by their high margins.
If the warranty insurance if effectively outsourced, they should reduce list price accordingly, since they no longer carry the burden.
Or have I misunderstood?
John
I think this refers ONLY to after-market warranties, which have always been outsourced to 3rd party providers (like every other manufacturer, AFAIK).
But nice idea!!!
What this ACTUALLY shows is that BMW don't care about their top-end customers (and by inference any customers?), as they are prepared to let the long-term rep of the brand suffer to shore-up short-term profit margins (common disease in today's stock markets...and very short-sighted). Why? Because as the image tarnishes, the residuals of the cars falls. Who here would want to chance a 5y.o. M-car now??? But what they haven't fully thought-through is that if an M3's residuals fall, it will have a knock-on effect on the rest of the range - M3's come closer to 330 territory, some less-aware or less-risk-averse punters decide to go a step up, less demand for the 330...and so on down the chain, until 318's are fetching Mondeo-money (metaphorically).
Being honest though, cars have been increasingly seen as 'disposable' by the manufacturers for a while now...if they last forever and are easy to repair, people won't buy as many new ones, will they?!? Elementary marketing. Become standard practice in the white goods market - 'Planned Obsolescence'. It's not just BMW, it's just BMW's image has protected it somewhat up until now.
mondeoman said:
Ergo, M series are not as reliable as they would like you to believe, and if BMW dealers can warrant a car for a year after purchase, why cant the users extend that warranty at the same cost?
Did quite a lot of research into this as was looking at a Z3M coupe - the running costs staggered me (a TVR Cerbera would be cheaper to run if you factor in the warranty). BMW's argument is slightly disingenous - M cars are not just more pricey to fix; they also seem to go wrong more often! Having the double VANOS blow up (at £1800 a time) on the E36 series M3 engine seems to be quite accepted by owners, and dealt with under warranty. And the E46 had bearing issues etc etc...
And don't even start on the official BMW servicing required to keep the warranty valid...
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