I think you're very lucky there as I don't think they're legally obliged to cover that once the warranty expires, unless I'm mistaken? I think that's a fabulous bit of service you've received there.
Why did they drop the bill by £650, particularly as it's relatively easy money? I'm pleased for you but I think I'd be wasting my time trying at my dealership, on past experiences.
It does seem strange that they'd drop the bill by so much until you start poking around for information -- specifically
this article which says:
Volkswagen are covering replacements out of warranty, in Germany the parts are covered for five years and 150,000 km with Volkswagen covering 50% of the labour costs in the fourth year and none in the fifth year. In Australia cars have been covered 6 months out of warranty.
Although it references the situation in Germany, it does happen to be the exact same "deal" that was offered to me, i.e. 100% free parts and 50% free labour (as my car is now 4 years old). Perhaps it's just a coincidence but I think that some dealers are just more on the level with their customers than others...
