Mechanical Breakdown Insurance. Is it worth it?

Mechanical Breakdown Insurance (MBI) is commonly offered when purchasing a vehicle, especially through a dealer or as part of car finance . On the surface, it sounds reassuring. If something goes wrong, the insurance should help cover the repair costs. In reality, whether MBI is worth it depends heavily on the fine print and, most importantly, whether you are free to choose who repairs your car.

The biggest issue. Choice of repairer

In our experience, MBI is only worthwhile if you can choose the repairer who carries out the work. Many MBI policies restrict you to a list of preferred or approved repairers. This means you may not be able to take your vehicle to a specialist you trust or to a workshop with proven experience in complex repairs such as CVT transmissions or engines.

Insurance policies should exist to help cover the cost of repairs, not to take away your authority and decision-making. It is your asset, not theirs, and you should have the right to choose who works on it and how it is repaired.

Your car is your asset, and you should be able to decide who works on it.

Why dealers push MBI policies

Car dealers often encourage MBI because it is usually bundled into the finance agreement. This means you are not only paying for the policy itself, but also paying interest on it over the life of the loan. Additionally, dealers typically receive a commission for every policy sold.
While this is legal, it is not always transparent, and many buyers do not realise how much more they pay over the long run.

Repair limits and inflated costs

Most MBI policies include a maximum claim limit, such as NZD $6,000. The problem arises when repair costs are inflated well beyond normal market rates. This can happen more often when insurers control where the car is repaired.
If the repair cost exceeds the policy limit, the difference is paid by you. For high-cost components like transmissions and engines, that shortfall can be significant and unexpected.

Delays and reduced repair standards

Another common issue is time. Because the insurer controls the approval process and the repair pathway, jobs can take weeks longer than necessary. In some cases, claims are partially declined, with insurers opting for temporary fixes or fitting second-hand parts, sometimes with warranties as short as three months.
For major mechanical repairs, this can leave vehicle owners exposed to further issues down the line.

An alternative approach. Self-insuring

Our honest opinion is that, for many people, MBI is not the best value option.
Instead, consider setting aside a small amount of money each week into a dedicated savings account for vehicle repairs. If something does go wrong, you retain full control over where and how your car is repaired.
Today, flexible payment options are also available, such as Afterpay, finance top-ups, or separate vehicle loans, often at more competitive rates than bundled dealer finance and insurance products.

Transparency matters

This is why we choose to display our prices online, along with clear conditions and warranty information. There are no surprises, no hidden limits, and no restrictions on how repairs are carried out. You know exactly what you are paying for and what you are getting.

Final thoughts

Mechanical Breakdown Insurance is not automatically a bad product, but it is only as good as the freedom and transparency it offers. Before signing up, always ask:

• Can I choose my own repairer?
• What are the claim limits?
• What parts will be used and what warranty applies?
• How long do approvals and repairs typically take?
  
  

If the answers are unclear or if your choice is restricted, it may be worth reconsidering and keeping control of your vehicle and your money instead.