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When will luxury cars get five-year warranty?

Now that most mainstream brands have five years warranty coverage or more, luxury marques are under the spotlight.

Pressure is mounting on luxury car brands to boost their warranties to five years or more, now that nine of the Top 10 brands offer extended coverage as standard.

In particular the decision by car giants Toyota and Volkswagen to increase their warranties from three to five years from January 1, 2019 has made it increasingly difficult for their respective luxury affiliates Lexus and Audi to hold out.

Lexus shares much of its mechanicals and technology with Toyota cars, and Audi in most cases has identical engines, electrical systems and vehicle platforms to Volkswagen vehicles.

Lexus has offered a four-year/100,000km warranty since October 2001. Audi currently has a three-year warranty, the same as BMW, Mercedes-Benz and Jaguar Land Rover.

Consumer advocacy group Choice said buyers of luxury cars should expect the same if not better coverage than what mainstream brands offered.

“It’s odd to have a situation where cheaper cars have better warranties than expensive luxury cars,” said Sarah Agar, Choice’s head of campaigns and policy.

“Most reasonable people would expect an expensive luxury car to operate functionally and well for more than a few years. You have to ask what are the luxury brands doing? They need to step up their game and do the right thing by consumers.”

Ms Agar added: “The important thing for consumers to know is that when they purchase a new car they have rights under Australian Consumer Law, and that means their rights to a remedy don’t expire just because a warranty has expired. Australian Consumer Law states that goods need to last a reasonable amount of time.”

CarAdvice understands most luxury brands plan to increase their warranty coverage at some stage but the changes are being held back while they conduct a cost analysis.

Each car company holds a portion of their profit margin from the sale of each individual vehicle to go into a pool of funds to cover future warranty costs.

Increasing coverage from, say, three to five years means they need to hold back more funds at the time of sale – which means the selling price of the car may increase or the company needs to redirect a portion of their marketing funds to support it.

In most cases warranty costs are handled by the parent company overseas after being forwarded by the brand locally.

However, some brands are shifting warranty responsibility onto the local subsidiary in return for a lower factory gate price.

Regardless of how the funds are sourced, there is no doubt the investigation into the car industry by the Australian Competition and Consumer Commission that has been running since 2015 has had a profound benefit for consumers.

Several brands – including FordHolden, Hyundai, Volkswagen, Jeep, Alfa Romeo, Fiat and Chrysler – have signed court enforceable undertakings to better handle customer complaints. Others may follow.

Most automotive brands have now agreed to a refund or replacement if a fault causes a brand-new car to be undriveable within the first 60 days of ownership, as well as taking on a long list of other improved consumer protections.

The ACCC investigation into the entire industry has prompted car companies to review how they handle warranty repairs after countless complaints from customers who were charged for work that should have been done for free.

This is partly why so many mainstream brands have since increased their warranty coverage to five years or more, because Australian Consumer Law makes it harder for car companies to shirk their responsibilities.

A statement from Lexus Australia said: “We have no plans to change the warranty coverage. It is already among the best in the luxury market. We continually review all aspects of our relationship with customers and listen to them. They tell us they want Lexus to look after them as a customer, which is a much broader expectation than the warranty that is already among the best in the luxury sector.”

Audi Australia currently has a five-year warranty as part of its “Open Haus” sale for the month of January but at this stage it won’t be extended. Instead, the company is understood to be considering an overhaul of its capped price servicing program.

A statement from Audi Australia said: “We don’t have plans to change our current offering of three years/unlimited kilometres. However, we are constantly monitoring the market and assessing the needs and priorities of our customers.”

A Mercedes-Benz Australia spokesman said: “Mercedes prides itself on customer service and customer satisfaction and we abide by Australian Consumer Law. Our data shows we have excellent levels of customer satisfaction. Our CSI (customer satisfaction index) score is among the best in the automotive business. At this stage we have no plans to increase our three-year warranty.”

BMW Australia says it is “observing the market and consulting with dealers on a constant basis ... (but) at this stage we are keeping to the three year warranty plan, with unlimited kilometres”.

A Jaguar-Land Rover spokesman said both brands have “no plans to increase our warranty at the current time” and added that extended warranties that boost coverage from three to five years cost between $2000 and $3000 depending on the model.

This reporter is on Twitter: @JoshuaDowling