BMW responds to warranty critics

M Cars cost more to fix, says Munich firm

By PH Staff / Tuesday, 21 March 2006 / Loading comments

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BMW has responded to the criticism currently being thrown in its direction following an increase in the cost of warranties for M cars -- see links below for related stories. The increase, up to 46 per cent in a year according to BMW customers, was widely hailed by BMW owners as being unnecessary and swingeing.

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...