Warranty sales from Warrington wrote to SuperSpark, asking about collecting warranty payments from a customer. He writes,

"If I offered and sold a mechanical breakdown warranty on a cash deal, would I be allowed to collect the payment for the warranty from the client?"
 
SuperSpark replies:

Dear Warranty sales,
 
Please note that a mechanical breakdown warranty product is underwritten by an insurance company, therefore the marketing and selling of such products are regulated by the short-term insurance and FAIS acts.

As the salesman, you should be registered as a fit and proper representative under a FSP license, if not, you are not allowed to offer and sell these products.

If you are fit and proper and you do offer and sell warranties on your cash transactions you must supply the customer with two invoices, one for the vehicle and one for the warranty. The customer must pay you for the vehicle and pay the warranty company or administrator the amount for the cost of the warranty.

There are several options available to a dealership with regards to “split invoicing”. The reason for the split invoice is that you as the dealer are not allowed to accept or handle insurance premiums.

The sale of a warranty for cash and the acceptance of that amount by the dealer, are deemed the handling of insurance premiums. If you do this you are in contravention of the short-term insurance act. Please do not stop selling warranties as it protects you as well as your customer.

Explain to your customer the reason for the separate invoice. That is to protect him/her and the dealership from contravening the short-term insurance act.

Happy sales, gotta fly now!

SuperSpark