“Our almost-new Kia’s transmission keeps failing. Should we trade it in early?”

Q. Our Kia dealer replaced the transmission on our nearly new 2019 Forte with a rebuilt one that failed two days later due to a missing seal. The seal was inserted into the rebuilt transmission and they told us it was “safe” to drive. We left the car at the dealership for over five weeks, and then towed it home last week and parked it. 

I contacted Kia Canada to request a new transmission. After two transmission failures and two near-collisions with the car failing at intersections, I think the car is unsafe. Apparently, it will require a third failure and/or near-death experience before they OK the dealer to install a new transmission.

My dealer has offered to let us trade up to a new 2020 Forte for $6,000 plus fees, or trade across for acomparable used vehicle. Here are the details provided:

• $22,915 for a 2020 Kia Forte Ex Premium at the dealer invoice price with the Kia Cash Discount
• minus $17,000 for our 2019 Forte trade-in (estimated retail value of $19,995)
• cost to trade up: $5,915 difference before taxes plus GST/PST/air tax reimbursement/tire levy = $6,759.20

We bought the car just nine months ago and own another Kia as well. It seems unjust to pay so much to buy a one-year-newer version of the same car.
–J.L.

A. It looks like your dealership’s sales manager is giving you the straight goods, as the offer for your trade seems correct.  You may be wondering why the value of the car has dropped almost $7,000 in less than a year—that’s more than 25%! 

Trading in your car early

Here’s the answer: A used car buyer for your 2019 will need to finance it at the bank’s loan rate of 5% to 6%, whereas a new 2020 Forte can be financed at an interest rate around 1% (with some help from Kia’s loyalty discount offered to current owners). Low-interest-rate, factory-supported financing contributes to a significant drop in values for many vehicles in their first year on the market. Your used 2019 Forte, financed for 72 months at a bank rate for good risks, will incur almost $4,000 in interest charges over the life of a loan, whereas the cost of financing a brand new Forte will run between $0 and $1,000 because of the manufacturer’s subsidy.

The dealer is also hoping to clear $2,000 on your old car when they resell it, after paying for advertising, preparing it for sale, and offering a discount to the buyer. It should be easy to prepare your nearly new car to sell it, but many dealerships apply a sort of average charge for advertising and reconditioning to all vehicles in their inventory.

If you decide that a new vehicle is the solution you are looking for, you may wish to use the APA’s new vehicle price service to compare the quote you received from the dealer with the true invoice price and applicable customer rebates and incentives at the time of sale. The dealer’s offer seems to assume you will be paying cash. Most Kia buyers need financing, in which case it will be more advantageous to take the below-market-rate financing.

Warranty repairs on the transmission

The rule with a warranty repair is to perform it with components of equal or better condition than the vehicle. On a 2019 vehicle, the manufacturer almost always specifies new parts, but reconditioned can be as good as new for many components. The Kia dealer likely used a reconditioned part because a complete new transmission was not available. The second failure appears to result from an error—something the APA is seeing more frequently today with transmission repairs, largely because they have become much more complicated.

 You probably should give the car another try before asking to cancel the sale, or taking an action to recover the cost of a new transmission, which may have to wait weeks for a delivery from Korea or the U.S., and require you to pay for the repair out of pocket and seek a reimbursement. If you hold onto the car as-is, the transmission still has four years of warranty remaining.

What you can do now

If your vehicle initially lost motive power suddenly with no warning, you should report the incident to Transport Canada’s defect investigation service. As your vehicle was already repaired, there is nothing for them to inspect, but they will be interested in logging details of the original transmission failure. The second failure, which appears to be the result of an error made in the dealer’s service department, is likely outside their authority. Be sure to have the vehicle identification number (V.I.N.) handy when you make your call. (1-800-333-0510).

 Make sure your service records are complete. Some dealerships do not provide customers a record of warranty repairs, on the basis that the work performed is without charge to the customer. You’ll need those warranty repair work orders to document your claim if problems reoccur. 

 Consider installing a dash cam. This will ensure that you have a compelling record if the car’s transmission loses motive power again.  

Should another failure occur, you could apply to the Canadian Motor Vehicle Arbitration Plan (CAMVAP) for either a new transmission or the buyback of your vehicle. CAMVAP is an auto industry-run arbitration program (you can learn more about it on the APA website or in this MoneySense column). CAMVAP is effective for obtaining repairs the automaker does not want to cover. However, CAMVAP is less effective for securing the return of a bad vehicle.

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