Does My Warranty Hold If the Manufacturer Goes Bust?

What happens to your warranty if the car manufacturer goes bankrupt? Will your warranty still hold? Let’s take a look at some of the common questions car owners ask so you’ll be better prepared if ever this happens to you. 

What kind of bankruptcy filing would it be?

If the manufacturer gets into financial difficulty, the company could enter into a Company Voluntary Arrangement (CVA), and an agreement will be reached with creditors so the repayment can be made over a certain period for a percentage of the debt.

This may enable the company to continue trading. But there are cases where the company would go for complete bankruptcy too. And the way this happens will of course vary according to the laws of the country in which they trade. 

How will the bankruptcy affect my warranty?

This is a potentially complicated answer too. The warranty could become null and void if the car maker goes bust unless it has been bought out by another company. In this scenario, it's likely that the new company will take on the existing warranties on cars previously sold.

If part of the sale agreement includes servicing the warranties, then your car should still be covered. Warranties purchased through a third-party insurance company should still see their warranties covered and should not be affected by the manufacturer going out of business. 

It's always important to check any terms and conditions before purchasing a car when it comes to factors like the warranty. 

What about my 0% financing and rebates

Don’t worry about your zero per cent financing and rebates. The lender should honour agreements such as 0% financing and rebates.  But do always contact your lender directly for reassurance. 

How will the bankruptcy affect the car’s value?

Sometimes car buyers avoid car brands that have gone bankrupt because they worry that the warranties may no longer hold or that it would be a pain to look for service or parts in the future. So this may affect the value. 

If you have a car that is only one to two years old, then it usually still has warranty coverage. But cars that are five years old or older will be less risky for the car buyer since they wouldn't usually still be under warranty anyway.

Consequently, the car's value may drop significantly as there might no longer be a valid warranty. Buyers are sometimes worried about purchasing a vehicle that the manufacturer no longer makes parts for and is harder to track down. 

Can I still get car parts?

It’s highly possible that business will go on as usual while the manufacturer is going through a restructuring process, or is in administration.

However, there might be cases where the car manufacturer, won’t be able to come to an agreement with the new terms or renegotiated contract.

If this happens, then the supply of car parts might be disrupted, but keep reading to see that on the whole, you can expect to be able to get car parts long into the future. 

Will there still be car parts in the future?

Manufacturers are expected to have an ample supply of service parts. These should be available throughout the life of the vehicle, and this especially applies to parts that are made particularly for a specific make and model.

During a bankruptcy, this may change, and these parts could be more difficult to find. There are usually parts that are compatible with various car models.

However, these parts may not always function perfectly for your vehicle. But if you have no other choice, you can always try these after-market parts to see if they will work on your car. 

What about repairs?

Your repair bills might increase or decrease, but should still be possible.  In this scenario, where the manufacturer goes bust, the garage can often source parts elsewhere, as the manufacturer will have usually bought these parts from other suppliers who still continue to make the parts.

Sometimes the repair process might take longer too, as the garage might have to shop around for the needed parts from other suppliers, but usually, this is not the case. 

What happens if my warranty company goes bust?

So, will your warranty hold if the warranty company goes bust? The manufacturer will do their best to honour agreements with customers, especially warranties. However, the final outcome often depends on the agreement the manufacturer can reach with the creditors.

If the warranty agreement is with a third party, and it's the manufacturer that becomes insolvent, it's unlikely you'll have any issues, no matter what the result is of the car markers situation.  👍