Are capped priced car servicing plans worth it?

Frustrated customer questions invoice from car mechanic dealership

Car companies are innovative thinkers and capped price servicing (sometimes called fixed price servicing) has probably been their most successful strategy to lock unsuspecting buyers of new vehicles into long-term servicing contracts.

While knowing how much a dealer service centre can charge a vehicle owner for a particular service in advance might sound appealing, the negative aspects of fixed-price servicing plans can often outweigh their claimed benefits.

Read on to learn more about fixed-price servicing plans and how you can avoid paying more for car servicing under such a plan than you were led to believe you would. Let us start by answering this question-

What are capped price servicing plans?

Before the introduction of capped price servicing plans (cps programs), car dealer service centres were able to charge car owners whatever they wanted for scheduled or routine services during a vehicle's warranty period.

This led to lots of confusion and resistance against car dealer service centres, so they came up with a plan. This plan was fixed price servicing and it had the alleged purpose of standardising labour charges and mark-ups on genuine parts. While car dealer service centres will have you believe that their fixed price scheduled servicing schemes set limits on what they can charge a car owner for any service, the reality is often a lot different. So, how do these schemes work?

Essentially, a customer buys into the scheme when they purchase a new vehicle. The dealer may offer to service the vehicle according to the manufacturers’ service schedule at a fixed or predetermined price and may even offer an extended car warranty. The customer agrees to have the vehicle serviced only at the dealer’s workshop for the life of the agreement.

Given the somewhat high cost of maintaining a modern vehicle, an unsuspecting car owner might view fixed price servicing as a guaranteed money saver, however, the devil is said to live in the details, or in this case, the fine print.

What you need to consider.

While common sense would suggest that all the items the car manufacturer specifies at each service would be covered under a fixed-price service plan, this is typically not the case, as including everything that should be done at every service often holds no financial benefits for the car dealer service centre.

While many regular service items like oil changes and spark plug replacement may be included, you could find yourself having to pay extra for fluid changes, certain filters, wear and tear items and more. Some of these service items may be required as often as every 12 months.

It is important that you thoroughly review the terms and conditions of any capped price servicing contract that you are considering entering in to. You can read more about what is often covered and excluded in capped price servicing programs here.

How long do capped price servicing plans run for?

This varies greatly between car manufacturers. In some cases, fixed-price servicing plans may run for the entire manufacturers' warranty period and sometimes a bit beyond, while others might only be available for a fixed number of standard scheduled services. Fixed-price servicing is not available on some vehicle makes sold in Australia and for makes that do, some models may be excluded.

Regardless of the length of the plan, you will typically be required to have the vehicle serviced only at the dealer service centre or dealer service network that sold you the plan at very strict service intervals.

For more details on which dealers offer fixed-price servicing, and on which models, you can view a comprehensive list here. This information was correct at the beginning of January 2020. Since some details may no longer be accurate or correct, we recommend that you contact your dealer of choice for the latest information on fixed-price servicing options.

This leaves us with the most important question of all-

Are capped price car servicing plans worth it?

While we cannot advise you not to enter into a capped price servicing plan under any circumstances, we can tell you that these plans may not be what they appear on the surface. Calling them swindles might be going too far, but the fact is that capped price service plans may disguise or mask the real costs of servicing and maintaining new vehicles. This is because of the many exclusions and hidden costs that often characterise capped price servicing plans.

We strongly recommend that you approach all capped price servicing plans with a great deal of caution. Do some in-depth research into the actual costs of owning and maintaining your new vehicle before you sign a capped price service contract, as it will almost certainly turn out not to be in your best interests. 

On the other hand, it is also true that maintenance and servicing costs of a modern vehicle (not just luxury cars) can get very expensive, very fast, if it’s not done right or properly. Wouldn't you prefer to have an aftermarket workshop list all of the included costs upfront, rather than receiving a bill from the dealer for service items that should have been included in any particular service?

So, are capped price servicing or fixed priced servicing plans bad? We believe so, simply because nothing that works against a car owner’s best interests can be good. 

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