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OMVIC Blog: Car Buying Tips

What to do next when a warranty is no guarantee

Apr 24

Monday, April 24, 2023  RssIcon

Written by: Graham Heeps – Automotive, Technical, and Business Writer

OMVIC’s compensation fund can help when a failed dealer has not registered your third-party warranty or offers a warranty and then goes out of business.

It’s always exciting to purchase a new vehicle but, a few years and several thousand kilometers after that initial excitement has worn off, many find themselves facing eye-watering repair bills. Adding an extended warranty when you purchase a new vehicle may help to avoid nasty surprises. A planned, predictable outlay upfront is often more manageable than an unexpected bill that might be hard to pay in the future.

Imagine how it would feel, then, if a year or two later, that nasty surprise turned up all the same. Your car now needs a major engine repair but when you submit the warranty claim to have your costs reimbursed, you discover that the provider has no record of the policy or the dealer offering the warranty has gone out of business.

In a previous article, we saw how a dealer’s failure to pay off a lien against a trade-in vehicle leads to problems for a new vehicle buyer and represents a major reason for the compensation fund administered by OMVIC, Ontario’s Motor Vehicle Sales Regulator, to pay out to consumers who have incurred financial loss. Unfortunately, warranty non-submittal and warranty failure are additional scenarios regularly encountered by the compensation fund team.

In most cases, when you purchase a third-party warranty, the dealer is legally responsible for submitting payment for that policy to the warranty provider within seven days of the transaction. Most dealers are diligent in fulfilling their obligations. But assuming that the process has been completed could still lead to problems in the future, according to David Dailly, OMVIC’s director of the compensation fund.

“We’re currently dealing with two major dealer failures,” he explains. “In both cases, consumers have been left without a warranty that they paid for. This in turn will have a significant impact on the compensation fund.

“I’d advise that whenever a customer purchases an extended warranty, they proactively follow up with the warranty provider to ensure that payment has been received and that they have an active policy,” he continues. “Double-checking that process at the start could save the customer considerable anxiety, effort and potential financial loss at a later date.”

OMVIC’s compensation fund is supported by contributions from its registered dealers. It exists to compensate customers who have incurred financial loss through no fault of their own, within prescribed eligibility criteria – including when a dealer has failed to remit payment on an extended warranty contract, or has not paid for a repair covered that would have been covered under the warranty. If you think you might be in line for compensation, Dailly recommends you first reach out to his compensation fund team to confirm eligibility. The application form is available to download from the OMVIC website and his team can talk you through the process of filling and submitting the form.

In all cases, buying from an OMVIC-registered dealer offers the best protection because the compensation fund does not pay out on vehicles bought privately. As ever, a vehicle history check such as CARFAX, before you buy, should also highlight any major causes for concern in the vehicle’s past and provide peace of mind around your prospective purchase.

Another great tip in this busy season for car-buying is to ensure that all the terms of the sale are written explicitly in the contract as there is no cooling-off period on vehicle sales in Ontario. It’s easier and cheaper to take some time to avoid an issue upfront, rather than to try to fix it after the event, even when a dealer has engaged in dishonest behaviour.

If you’re looking for further advice, OMVIC is there to help consumers navigate the process of buying a new or used vehicle and ensure dealers comply with the law. Visit to access free car-buying resources to get you started and sign up for the quarterly newsletter, Consumer Line.

Contact OMVIC’s consumer support team at or 1-800-943-6002 for expert advice and answers to all your car-buying questions.

Follow OMVIC on social media to stay up to date on the latest news.
IG: @omvic_official
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Facebook: Ontario Motor Vehicle Industry Council (OMVIC)

This story was created by Content Works, Postmedia’s commercial content division, on behalf of OMVIC.

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