Mechanical breakdown insurance - why you don't need it

Don't buy what you don't need

Our mechanical breakdown insurance infographic shows why you shouldn't buy this type of add-on insurance product when you purchase a car from a dealer.

2016 Mechanical Breakdown Insurance 01
2016 Mechanical Breakdown Insurance 02

 Mechanical breakdown insurance: why you don't need it

The cost of mechanical breakdown insurance (MBI) from a car dealer

  • $1,482 - average premium paid upfront1
  • $940 - average claim paid out2
  • Only 1 in 10 people made a claim on their MBI policy3

What happens when you buy mechanical breakdown insurance?

Mitchell Amelia
Both buy a new car for $30,000 from a car dealer

Buys an MBI policy from a dealer

Doesn't buy an MBI policy

2 years after purchase, both cars' brakes fail
Both cars are fixed for free under the 3-year new car warranty
4 years after purchase, both engines fail

MBI insurer covers the cost of repairs to Mitchell's car4

Manufacturer fixes Amelia's car under Australian Consumer Law4

Amelia is $1,482 better off than Mitchell because her car was fixed even though she didn't have MBI

Be prepared for the hard sell

Dealer: If I sell this MBI policy, I'll get a commission!

Questions to ask the car dealer before you buy MBI

  • How much commission will the dealer get if I buy MBI?
  • What will the MBI premium cost me?
  • What repairs are not covered by MBI?5
  • What does the MBI cover that Australian Consumer Law doesn't?
  • When does the policy start and end?6

Don't buy what you don't need. Find out more about mechanical breakdown insurance.


  1. Average upfront premium paid for new policies purchased between 1/07/12 - 30/06/15 (ASIC report- A market that is failing consumers: The sale of add-on insurance through car dealers)
  2. Average claim paid out between 1/07/12 - 30/06/15. (ASIC Report- A market that is failing consumers: The sale of add-on insurance through car dealers)
  3. Number of successful claims on MBI policies between 1/07/14 - 30/06/15. ASIC data not publicly available.
  4. All consumers have the right under Australian Consumer Law to have their car fixed or replaced by the manufacturer if the product is not of acceptable quality. For more information, visit the ACCC's webpage on consumer guarantees.
  5. All MBI policies have a list of exclusions, so make sure sure you understand what the policy does not cover.
  6. MBI policies start after the end of any manufacturer's or dealer's warranty provided with the car. The length of time and kilometres covered by the policy can vary, so it is important to ask the dealer about this.

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Last updated: 09 Sep 2016