Is mechanical breakdown insurance worth it?
Mechanical breakdown insurance, or MBI, gets added to a lot of car deals, often rolled straight into the finance. Sometimes it's genuinely worth having. Often it isn't, and financing it makes it worse. Here's the honest breakdown so you can decide for yourself instead of just ticking the box at the desk.
What MBI actually is
Mechanical breakdown insurance covers the cost of certain repairs if parts of your car fail, a bit like an extended warranty you pay for. It's not the same as your regular car insurance, which covers crashes and theft. MBI is about the engine, gearbox, and other mechanical bits packing up.
The finance trap to watch
Here's the part that costs people the most: if MBI is rolled into your car loan, you pay interest on the premium for the entire term. A policy that looks like a few hundred dollars can quietly cost close to double once it's financed over five years. If you decide you want MBI, it's almost always cheaper to pay for it separately than to bundle it into the loan.
When it's worth it
- The car is older or higher-kilometre, where a major repair is a real possibility and would genuinely hurt your budget.
- You value the certainty of a capped repair cost over doing your own maths.
- The policy actually covers the parts most likely to fail on your specific car, with a fair excess.
When it usually isn't
- The car is new or nearly new and still under manufacturer warranty, so you'd be paying twice.
- It's a cheap car where the premium over a few years approaches what the car itself is worth.
- The policy is stuffed with exclusions, wear-and-tear and pre-existing faults are commonly not covered, so the likely failures aren't even included.
What to check before you sign
The excess per claim, the exclusions, the claim limits, whether it covers your car's likely weak points, and whether the provider is reputable and easy to claim with. A cheap policy that excludes the failures you'd actually have is not a bargain.
The alternative most people overlook
Buy a reliable car with a good service history, keep up the maintenance, and put what you'd have spent on premiums into your own repair fund. For a lot of people, self-insuring like that comes out ahead, and if nothing breaks, the money's still yours.
Where Fair Finance stands
We think add-ons should be your choice, made with the full cost in front of you, not something quietly slid into your loan. We'll always show you what an add-on really costs once it's financed, so if you say yes to MBI, it's because it's worth it to you, not because it padded someone's commission.
General information only, not financial advice. Always read the policy wording before buying insurance.
Common questions
Is mechanical breakdown insurance worth it in NZ?
Sometimes. It can make sense on an older or higher-kilometre car where a big repair would hurt, and you value the certainty. It's often poor value on a nearly-new car still under warranty, or a cheap car where the premium over a few years can approach the car's value. Read the policy's exclusions and excess before deciding.
Should I add MBI to my car loan?
Be careful here. If MBI is rolled into your finance, you pay interest on it for the whole term, which can double its real cost. If you want MBI, it's usually cheaper to pay for it separately than to finance it.
What should I check in an MBI policy?
The excess (what you pay per claim), the exclusions (wear-and-tear and pre-existing issues are often excluded), claim limits, whether it covers the parts most likely to fail on your car, and whether the provider is reputable. A cheap policy that excludes the likely failures isn't cheap.
What are the alternatives?
Buying a reliable car with good history, keeping up maintenance, and setting aside what you'd have paid in premiums as your own repair fund. For many people, self-insuring like this comes out ahead over a few years.
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