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Compare Mechanical Breakdown Insurance - The Definitive Guide

Mechanical Breakdown Insurance can be an expensive and unnecessary add-on to car finance, but many New Zealanders buy a policy and there are insurers who offer value. While Consumer NZ has argued that it may offer the same protection as the Consumer Guarantees Act but at a high cost, our guide outlines everything you need to know to make an informed decision about whether you need MBI.
Updated 10 December 2024

Summary:
  • As the name suggests, Mechanical Breakdown Insurance covers the costs of repairing your car that arises from a mechanical breakdown. The policy provides a guarantee for automotive machinery and electronic faults. As car insurance doesn't cover such faults, MBI is designed to protect drivers from unpredictable (and often unaffordable) mechanical repair bills.
  • The idea is that MBI protects you from the risk of having to pay for repairs should your car break down, which could otherwise affect your cash flow and ability to make loan repayments. 
  • However, there are a lot of policy exclusions, meaning claiming on MBI can be difficult. For example, if your car has a cambelt issue, exhaust problem or "light bulb" issue (which could include sensor malfunctions), you won't be covered. There are many more exclusions on top of those. 
  • MBI isn't cheap - policies can cost around $1,000 to over $4,000, covering the car for 1-4 years. The amount usually added to a car loan, so you'll be charged interest while you make your standard car repayments. 

Know This: 
  • If you want to buy MBI, make sure you're not overpaying. We're not fans of overpriced MBI, and nor is Consumer NZ. The Australian Securities and Investments Commission (ASIC) has found that add-on insurance offered via car finance gave poor value. Specifically, add-on insurances (which include MBI and GAP insurance) paid out 9 cents for every dollar collected in policy fees. 
  • There's no New Zealand data on payouts, but we believe the policies may operate in the same or a very similar way to Australia. What this means is a lot of the money you pay for an MBI policy is given to car dealers as a commission, with the rest going to the insurer.
  • We believe MBI is sold as an add-on to car loans and have published this guide to raise awareness of the costs and give readers the power to gather quotes specific to a particular car. 
  • Please be very careful before buying any MBI policy alongside a car loan - Car Loan Expert's MBI review has more information if you're interested in comparing policies and learning more.
To help explain Mechanical Breakdown Insurance, our guide covers:

Christopher Walsh shares his comments about MBI policies:

"Mechanical Breakdown Insurance (MBI) is often viewed as a mixed bag—both a safeguard and a potential expense. I believe it's oversold and used as a profit-maker at some dealerships when car finance is removed; I remain critical of such situations.

However, MBI does have its value, although it depends heavily on the type of car you own, how you drive it, and your tolerance for financial risk. For some, MBI is an unnecessary expense; for others, it's been a financial lifesaver where the cost of repairs claimed has far exceeded the policy cost.

For high-end vehicles, particularly European models like BMWs, Audis, or Volkswagens, MBI can be invaluable. These vehicles are renowned for advanced engineering and luxury features but infamous for high repair costs. A single major fault - a transmission rebuild, an electrical system failure, or issues with cooling systems - can easily cost thousands. In these cases, a robust MBI policy with high claim limits, such as Autosure's Extreme Plus, can pay for itself many times over. It's a tool to offset the financial risks inherent in owning complex and high-performance vehicles, ensuring owners can drive with confidence.

For everyday cars, such as Toyotas, Hondas, or Mazdas, MBI is arguably less valuable. These vehicles are designed for reliability and low maintenance costs, so the likelihood of frequent or catastrophic failures is lower. However, even the most reliable vehicles can experience unforeseen issues, especially as mileage increases. A gearbox failure, cooling system breakdown, or suspension issue can still result in repair bills exceeding $1,000 - well within the scope of most insurers' MBI policy coverage.

The value of MBI also depends on personal circumstances. For some, the cost of a 1, 2, 3 or 4-year policy (usually paid upfront) is worth it for the peace of mind that comes with knowing that MBI policies will take care of breakdowns (when covered by the policy). For others, committing to regular payments for a product they may never use feels like a waste of money. For this reason, it's essential to assess your vehicle's age, mileage, repair history and intended use when deciding whether MBI is worth it.

Finally, not everything with MBI is smooth sailing. Exclusions, claim limits, and excesses can vary significantly between providers. Policies that cover comprehensive mechanical failures, even in high-wear areas like suspension and cooling systems, offer the most value. Transparent terms, manageable exclusions, and a reputable underwriter are critical factors to look for.

Ultimately, MBI is neither a must-have policy nor a waste of money. It's a calculated tool for managing risk, and when it aligns with your vehicle and needs, it can deliver substantial benefits and peace of mind". 
Christopher Walsh
MoneyHub Founder
Know This: Do I need Mechanical Breakdown Insurance if I have fully comprehensive car insurance?
  • Car insurance pays out for damage or total loss - it does not pay out for the costs of repairing your car if it breaks down.
  • Mechanical Breakdown Insurance is designed to protect you from qualifying car repair costs. The problem is many car problems aren't covered, so you'll need to pay for your repairs. 
  • Mechanical Breakdown Insurance and typical comprehensive car insurance have no crossover and address very different risks.
  • You may also be offered Guaranteed Asset Protection Insurance (GAP) when you finance a car - our guide explains what this is in detail.
Christopher Walsh
MoneyHub Founder
Are you looking for MBI alongside car finance? Avoid high interest rates and fees with our trusted lenders.
  • We focus on highlighting the top car finance options to help you avoid costly high interest rates and unnecessary fees that add up too quickly. Our extensive research has consistently highlighted two trusted lenders who offer fair, competitive interest rates for most borrowers.
  • Simplify – A dedicated car loan specialist, Simplify has built a strong reputation for offering some of the most competitive rates and terms in the market. For 2024, we've named them our Favourite Car Loan Lender for their customer-focused approach and proven ability to get New Zealanders into cars with great finance deals. 
  • Harmoney – If you prefer a low-fee personal lender with an easy, fully online process, Harmoney is a great option for secured car loans. Their streamlined application can help you secure a loan quickly and efficiently.
  • Why Compare? Comparing car finance options can save you thousands. Even a 1% lower interest rate can significantly reduce your repayments. While dealership financing might seem convenient, it often comes with higher costs to boost their profits. By exploring different lenders and brokers (such as Simplify and Harmoney), you can secure a better deal, avoid unnecessary markups, and ensure you're not overpaying for your car.
  • Important: The interest rate you lock in now will impact your repayments for years to come, so choose wisely and compare before committing.
  • Advertising Disclosure: We may receive a commission if you proceed with a loan through our partners. However, this does not influence our recommendations, and all lenders are thoroughly vetted for fairness. Rates vary based on individual credit profiles.
​

Why does Mechanical Breakdown Insurance exist?

  • Car repairs are expensive. People who buy cars with finance often have significant loan repayments. If the car breaks down, fixing it can mean immediate financial hardship. 
  • Mechanical Breakdown Insurance is designed to reduce this risk by paying for repairs should your car break down. It means you'll be protected from expensive mechanic bills and can better manage your cashflows.
  • Standard policies cover breakdowns caused by faults with a car's engine, fuel system, turbo unit, automatic/manual transmission, electrical, clutch, transfer box, overdrive, prop shaft, suspension, front wheel drive assembly, air conditioning systems, cooling systems and steering etc. The more comprehensive the policy, the more conditions that are covered.
  • However, Mechanical Breakdown Insurance is not without risks - many 'breakdowns' are ineligible for cover. Australian regulators believe consumers don't get value for money when taking on add-on insurances, including MBI. For this reason, it pays to be cautious.

Car Warranties vs Mechanical Breakdown Insurance - Understanding the Difference

MBI, for the most part, is only purchased by a small number of drivers. When you buy a car from a dealer, there is no obligation to buy mechanical breakdown insurance. There may be sales pressure, but it's not compulsory to have even if you get a loan to buy the car. If your car isn't of acceptable quality, the Consumer Guarantees Act (CGA) requires the dealer to sort it out.

Buying a new or used vehicle from a dealer (either online, at a car yard or at an auction) gives you more consumer rights than if you buy a car privately. All car dealers must:
  • Comply with the Consumer Guarantees Act (CGA)
  • Comply with the Fair Trading Act (FTA) – not mislead you and be clear they are a dealer
  • Be registered
  • Give you accurate information in the Consumer Information Notice (CIN) for each used vehicle – the vehicle's history, price, condition, odometer reading and any money owing.

If you buy a car from a dealer, we suggest reading this government guide that outlines your rights and ways of complaining.

What's excluded from Mechanical Breakdown Insurance policies?

In a nutshell, a lot of car faults and problems are excluded from standard MBI policies. Unfortunately, very few people read the fine print before getting a policy and find out the policy limits the hard way when their car breaks down. This Stuff.co.nz article outlines the limitations of a policy and outlines cases where policies haven't covered breakdowns.

Generally, Mechanical Breakdown Insurance excludes:
  1. All pre-existing conditions (this exclusion is contentious as 'pre-existing' may be unknown to you)
  2. Repairs related to a manufacturer’s recall or a design fault
  3. All repairs that relate to chassis, panel, paintwork, glass, upholstery and anything cosmetic
  4. All repairs that relate to a battery, exhaust systems, catalytic converters, tyres, entertainment system, heated sear elements, light bulbs, communication systems, fuel tanks, keys and remotes
  5. Cambelt failure
  6. Any costs such as servicing, maintenance, adjustment or tuning
  7. Rust, contamination, loss or damage and anything a comprehensive car insurance policy would cover (i.e. accident damage, fire damage, water damage, theft, full loss etc.)
  8. Using the wrong fuel and oil
  9. Repairs your Mechanical Breakdown Insurer doesn't approve

Exclusions - Our View:
  • There are so many exclusions in a typical policy isn't hard to know what would be covered should your car break down.
  • We know car dealers and car lenders sell MBI policies - Consumer reported that over 2 in 3 people were offered MBI when buying a car.
  • Consumer Protection law (outlined in this government website) specifically protects anyone who buys a car from a dealer; it must be "fit for purpose", which means if it has pre-existing faults, you'll need to be told about them. If you're not, you can ask for a refund or repair. 
  • The reality is anything to do with cars is problematic, and the driver often has less power and experience to push back with confidence. That being said, we don't believe buying MBI is a foolproof solution.
  • The profits by selling MBI are, we assume, high (as reported by Australian investigations), but there's no market data around claim success in New Zealand.
  • As such, we suggest being wary about policies in general - they can cost up to $1,000 (or more), and the cost is usually added on to any car finance taken. When it comes to claiming, we have no insights as to how successful your claim will be.
​

How Much Does Mechanical Breakdown Insurance Cost?

  • What you'll pay depends on the model of your car and its age.
  • For example, MBI is cheaper for Japanese and American cars than European cars
  • For luxury cars, MBI costs the most. Even though they're less likely to break down, when they do, the parts are expensive and the insurer pays this cost.
  • MBI policies have limits on what cars they cover; for example, the maximum age of the covered vehicles is usually 10-20 years, and the maximum kilometres on the clock is anywhere between 100,000 to 250,000. The older the car and the more kilometres on the clock, the more expensive the MBI.
​

Mechanical Breakdown Insurance – Pros, Cons and Alternatives

Mechanical Breakdown Insurance policies may solve a problem at a cost. This cost can be expensive. We outline what's important when looking at taking out a policy:

Pros:
  • Safety net – If disaster strikes and your car breaks down, you may be covered and avoid the cost of repairs. However, there are a lot of exclusions.
 
Cons:
  • High Cost – Mechanical Breakdown Insurance is expensive and often rolled up into car lending, meaning you'll pay interest on it.
  • Exclusions - So many 'breakdowns' are excluded, it's impossible to know in advance that you'll be successful when making a claim. Consumer New Zealand has reservations about MBI because of this fundamental uncertainty.
  • Hard to compare - Mechanical Breakdown Insurance costs are different per policy, but the growth in online quotes makes it easier to compare. However, we don't like how it is sold as part of a car finance deal (often high pressure with very little explanation around the fine print). As such, how it's sold isn't transparent as it's difficult to get quotes and compare.

Mechanical Breakdown Insurance Alternatives

There are two cost-effective alternatives to MBI. The first is to self-insure. This means you put aside some money every month for an emergency fund for car repairs. It takes a lot of willpower to make regular contributions and not use the money for other expenses, but if you do keep on track, the result is likely to be more affordable than taking out an MBI policy. The second alternative is to pay for a pre-inspection before you buy the car to avoid surprises and then to get the car regularly serviced to keep it in good condition.

If you follow both of these suggestions, you can avoid MBI altogether. Importantly, even if you have MBI and your car breaks down, there's a high chance that the cause and repairs may not be covered.
​

Mechanical Breakdown Insurance Policies - AA Insurance vs Autosure vs Fenda vs Autolife vs Quest vs Assurant Vehicle Care/Protecta vs Provident

Not all MBI policies are created equal. To help you make an informed decision, we’ve reviewed and compared the key features, claim limits, additional benefits, and eligibility criteria of the leading MBI providers in New Zealand, including AA Insurance (an Autosure policy), Autosure, Fenda, Autolife, Quest, Assurant Vehicle Care (previously known as Protecta) and Provident Insurance.

Other options:
  • Mechanical Breakdown Insurance is mainly sold by many car finance lenders, brokers and car yards (acting as a broker). Brands behind the policies include (but are not limited to) Stadium Finance, Avanti Finance, Marac and NZVF, all of who use third-party insurers reviewed in our table below.
  • Furthermore, ​State Insurance offers business-vehicle-only MBI policies, and Turners sells an Autosure policy. 

Our comparison covers:
  • Coverage highlights: What components are covered, including provisions for electric vehicles (EVs).
  • Claim limits: Maximum amounts covered for repairs and replacements.
  • Additional benefits: Value-added features such as towing, roadside assistance, and accommodation.
  • Eligibility criteria: Requirements based on vehicle age, odometer limits, and servicing.

Know This: Whether you own a petrol, diesel, hybrid, or EV, the right policy can make a significant difference in managing unexpected repair costs - our table below makes it easy to understand the difference in policies and benefits.

MBI Policy Coverage, Claim, Benefits and Eligibility Comparison Table

Insurer Coverage Highlights Claim Limits Additional Benefits Eligibility
AA (Assist & Assist Plus) Covers unforeseen mechanical/electrical breakdowns; includes EV package with battery cover ($5,000-$10,000); factory-fitted components covered. Up to $5,000-$10,000 for EV battery claims; total claim limited to market value of the vehicle. Roadside assistance, repatriation ($250-$500), accommodation, travel cover ($500-$1,500). Up to 20 years old, max 300,000 km odometer; stricter limits for EV components.
Autosure (Extreme Plus) Covers sudden breakdowns; EV battery up to $5,000-$10,000; towing, accommodation, and repatriation benefits included. Up to market value; $5,000-$10,000 for EV battery claims; max $750 for consumables. Roadside assistance, towing up to $200, accommodation up to $1,500; consumables covered ($750). Up to 20 years old, max 150,000 km for EVs; stricter limits for performance vehicles.
Autosure (Smart Cover) Wide range of vehicle components covered; EV battery ($2,500-$5,000); towing, accommodation, and repatriation benefits. Up to market value; $2,500-$5,000 for EV battery claims; max $500 for consumables. Roadside assistance, towing, accommodation up to $500; consumables covered ($500). Up to 15 years old, max 150,000 km for EVs; not for heavily modified vehicles.
Fenda Covers mechanical wear and tear; roadside assistance, towing, and vehicle recovery included; limited exclusions. Varies by plan; reasonable repair and replacement costs covered within policy terms. Roadside assistance, towing, vehicle hire, accommodation; repatriation options included. Covers private and dealer sales; servicing compliance required.
Autolife Replacement parts and repairs for mechanical failures; includes roadside assistance and vehicle hire options. Claim limit varies by component; vehicle hire up to $500, accommodation up to $1,000. Vehicle recovery and towing, optional roadside assist, flat battery, fuel delivery. Servicing records required; conditions for vehicles over 150,000 km.
Quest Covers sudden breakdowns; accommodation, travel, and vehicle repatriation benefits; limited EV options. Max $500 for special allowances; emergency towing up to $200 per claim. Accommodation and travel expenses for breakdowns 120+ km from home; towing covered. Standard servicing compliance; excludes pre-existing conditions.
Assurant Vehicle Care Maxi and Optimum cover; claim limit options ($6,000-$15,000); additional benefits for consumables and diagnostics. Max $6,000-$15,000 depending on plan; total liability limited to vehicle's market value. Roadside assistance, diagnostic and consumable cover, optional Uber/Taxi for EVs. Different plans for petrol, diesel, EVs; odometer limits apply.
Provident (Classic & Pinnacle Cover) Classic: Entry-level cover. Pinnacle: Superior cover with additional components and benefits. Classic: $500 for special allowances; Pinnacle: $1,000. Repairs capped to the vehicle’s market value. Roadside assistance (optional), towing ($200), travel allowances, accommodation, and repatriation if breakdown occurs >120 km from home. Requires servicing every 10,000 km (diesel) or 15,000 km (petrol). Excludes electric and certain performance-modified vehicles.

Best Mechanical Breakdown Insurance (MBI) Policies

To avoid overpaying, the best approach is to obtain quotes directly from insurers that provide online MBI pricing tools, including Autosure, Autolife and the AA. Every car will generate a specific quote, so it's important to compare.

Common Mechanical Issues Covered by MBI

MBI policies are primarily designed to address common mechanical failures, including:
  • Engine and Transmission: Repairs for engine or gearbox issues caused by unexpected breakdowns.
  • Cooling Systems: Coverage for radiator or coolant system failures is crucial for preventing overheating.
  • Suspension and Steering: Repairs for components like shock absorbers or steering racks that wear over time.
  • Brakes and Clutches: Coverage for sudden failures, excluding regular wear and tear.
  • Electrical Components: Repairs for alternators, starters, and other key electrical systems.​

Important: Coverage details provided are general examples and will vary depending on the specific MBI policy. Not all policies cover all components listed, and exclusions, limits, and conditions apply. For this reason, it's essential to confirm coverage before purchasing. Regular wear and tear is typically excluded unless explicitly stated.

Comparing the Top MBI Policies for Everyday Use:

Selecting the right MBI policy requires addressing specific risks unique to your vehicle and driving habits. We've identified and shortlisted what we consider the top policies to meet a variety of needs and coverage priorities:

1. Best for Comprehensive Mechanical Coverage: Autosure Extreme Plus
  • Autosure's Extreme Plus stands out for its robust inclusion of key mechanical components and high claim limits.
  • The Extreme Plus policy covers a wide range of components, including engine, transmission, suspension, and electrical systems, along with additional benefits like roadside assistance and accommodation allowances.

2. Best for High Claim Limits: Assurant Vehicle Care
  • Assurant offers one of the highest claim limits (up to $15,000) across its plans, making it worth considering for anyone owning high-value vehicles or those seeking broad financial protection.

3. Best for Flexibility Across Vehicle Types and Component Replacement Options: Autosure
  • Autosure's policies cater to various vehicle types, including petrol, diesel, hybrid, and electric vehicles.
  • The inclusion of tailored coverage options for different categories makes Autosure particularly versatile.
  • Autosure allows for using new, used, or reconditioned components during repairs.

4. ​Best for High-Value Vehicles: Autosure
  • With claim limits tied to the vehicle's market value, Autosure's policies are well-suited for high-value vehicles.
  • The Extreme Plus plan, in particular, offers coverage that aligns with the financial needs of luxury or newer vehicles.

Our view: Autosure's extensive benefits, and collaboration with AA and Turners (who offer MBI via Autosure's owner DPL) arguably underscores its reputation and trustworthiness and arguably makes Autosure a reliable choice for car buyers and owners seeking dependable coverage. However, it's critical to be fully comfortable with the policy before buying any policy.
​

Frequently Asked Questions

Is Mechanical Breakdown Insurance suitable for my car loan?

It depends - many New Zealanders benefit from the coverage and are happy to invest in a policy. However, depending on the policy, the exclusions can be extensive and that means there's no guarantee you'll be able to claim on a policy. If you're determined to buy a Mechanical Breakdown Insurance policy, we strongly suggest making sure you are aware of the fine print - i.e. what's covered and what's not covered, as well as the total cost of the policy.

Should I buy Mechanical Breakdown Insurance from a car dealer?

Many car dealers don't like customers with pre-approved finance as it lowers their overall profit on selling a car. For this reason, we suggest comparing options before signing up for any car loan, Mechanical Breakdown Insurance policy and/or any other add-on. While there may be aggressive sales tactics, you should never rush a decision. Car finance and MBI are both expensive, but many companies offer finance and cover, which means it's competitive and there are plenty of options.

Is Mechanical Breakdown Insurance worth the cost?

It depends. This Reddit post from early 2024 suggests there is value depending on the car insured. However, Australian investigations conclude that car dealers, car lenders and insurance companies make lots of money every time someone signs up for MBI. No insurance can be so profitable without there being a cost.

Can I buy Mechanical Breakdown Insurance separately from my car loan?

Yes - while Mechanical Breakdown Insurance is also an 'upsell' on typical car finance, you can buy a policy online or directly from an insurer.

Do I pay Mechanical Breakdown Insurance upfront or weekly?

You can do both. The policy is usually sold upfront, i.e. $50/month for 6, 12, 24, 36, 48 or 60 months etc. This ongoing cost can be "rolled up" into the car loan cost, meaning you'll pay for your MBI policy as you make repayments. Be very careful - when MBI is rolled up into the loan, you'll pay interest on the balance as the money is lent to you.

Can I cancel Mechanical Breakdown Insurance?

Yes, but only during a "cooling-off period". This is usually within five working days of agreeing to a policy. If you don't cancel within the cooling-off period, there are very few options for refunds later. Some Mechanical Breakdown Insurance policies talk about "transferring" the benefit to a new car owner if and when you sell your car, but don't think that "benefit" is worth much and won't increase the value of your car.
​

Mechanical Breakdown Insurance - Our View and Conclusion

  • MBI needs to be carefully assessed; if you're buying a policy as part of your car finance, adding the policy cost to the loan balance makes the overall loan more expensive.
  • We are well aware that many car yards across New Zealand offer Mechanical Breakdown Insurance (MBI) alongside car loans, as it provides them with a significant opportunity for profit. However, purchasing MBI in this setting often means paying a premium without fully understanding the terms and conditions.
  • To secure the best value, you'll likely want a policy that minimises exclusions while maximising benefits. This means choosing coverage that includes essential repairs and services without excessive limitations.
  • It's critical to be prepared (and avoid) the pressure commonly experienced in a car yard's sales office. This includes rushing buyers into decisions to 'drive the car away today' but don't offer value.
  • The best approach is to compare insurance quotes and consider whether MBI is necessary based on your car's age, warranty status, and condition.
Christopher Walsh
MoneyHub Founder
Are you looking for MBI alongside car finance? Avoid high interest rates and fees with our trusted lenders.
  • We focus on highlighting the top car finance options to help you avoid costly high interest rates and unnecessary fees that add up too quickly. Our extensive research has consistently highlighted two trusted lenders who offer fair, competitive interest rates for most borrowers.
  • Simplify – A dedicated car loan specialist, Simplify has built a strong reputation for offering some of the most competitive rates and terms in the market. For 2024, we've named them our Favourite Car Loan Lender for their customer-focused approach and proven ability to get New Zealanders into cars with great finance deals. 
  • Harmoney – If you prefer a low-fee personal lender with an easy, fully online process, Harmoney is a great option for secured car loans. Their streamlined application can help you secure a loan quickly and efficiently.
  • Why Compare? Comparing car finance options can save you thousands. Even a 1% lower interest rate can significantly reduce your repayments. While dealership financing might seem convenient, it often comes with higher costs to boost their profits. By exploring different lenders and brokers (such as Simplify and Harmoney), you can secure a better deal, avoid unnecessary markups, and ensure you're not overpaying for your car.
  • Important: The interest rate you lock in now will impact your repayments for years to come, so choose wisely and compare before committing.
  • Advertising Disclosure: We may receive a commission if you proceed with a loan through our partners. However, this does not influence our recommendations, and all lenders are thoroughly vetted for fairness. Rates vary based on individual credit profiles.
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