Extended Auto Warranties: Boom or Bust
Is it worth it to pay for extra coverage?
Web2Carz Contributing Writer
Published: July 6th, 2011
Extended Auto Warranties are sold and celebrated by car manufacturers, auto dealers and aftermarket warranty companies alike. Yet, a majority of consumer reports and customer reviews have declared extended warranties bad bets, false investments, and in some cases scams. So what is the scoop? Is an extended auto warranty right for you? These enigmas can be understood, and the informed consumer will make the right decision.
Extended warranties are, actually, not warranties at all. Unlike your OEM warranty that was included as apart of the original purchase of your vehicle, extended warranties are service contracts that come with prearranged deductibles, terms and limits. More like insurance policies, extended auto warranties are contracts that may cover major unanticipated repairs.
Extended warranties are offered at higher price through original manufacturers and at lower costs through independent, or aftermarket, warranty companies. An extended warranty purchased through your dealer may be more expensive, but is usually higher rated for its ease of use. Aftermarket extended warranties through independent companies may be cheaper, and payment or reimbursement for covered repairs can be more time consuming.
In most cases, extended warranties are service contracts that extend to 100,000 miles. Terms, limits and deductibles vary from provider, but the form and price of deductibles come in two typical categories:
• Pay-per Visit: A fixed deductible applied to every visit, regardless of the total covered service and repair.
• Pay-per Repair: A non-fixed deductible calculated upon the actual repairs done at the time of service.
Is an extended auto warranty right for you? It seems to be an honest gamble for some. Depending on your specific situation, vehicle type, and commute needs, an extended warranty may be a worthwhile wager. Yet, according to consumer reports and other sources, less than 60 percent of those who purchased extended auto warranties used them to cover major repairs. The rest paid into a service that they never needed. That is the gamble.
Before you place your bets with an extended warranty, here are some tips to make sure you are playing your cards right:
1. Know your needs, Know your Vehicle
Do you have a highly rated reliable vehicle that may not entail expensive costs through the proposed warranty period? Or do you have a vehicle that is notable to have higher service costs after the original warranty expires? Really research your vehicle to understand if an extended warranty is a bet you want to make—it could be a worthwhile investment.
2. Shop for the Best Plan and a Reliable Company
Make sure to check your vehicle’s manufacturer for extended warranty products and information. Do not just enroll in the first extended warranty you come across, and ask the sales rep why it would be a good gamble. An honest sales rep will evaluate your situation and needs, and will go beyond the scare tactics of “unforeseen and costly repairs.”
3. Understand Your Range of Coverage
Does the coverage apply to only vehicle parts that fail or breakdown, or does it only parts that need to be replaced from wear and tear? Comprehensive warranties that state they cover wear and tear are often more comprehensive than the less expensive breakdown warranties. Regardless of the immediate warranty pitch, the fine print here is important. Understand the range of coverage!
4. Understand Your Deductible, and your required service costs
Remember, enrolling in a monthly payment for an extended warranty does not promise free service and repair. Deductibles are standard in extended auto warranties, and service visits may have unexpected costs. Some extended service contracts are reimbursing, and may have you waiting weeks to months for a check from your provider. Make sure you understand what is required from you upon your next service visit!
5. Know Warranty Scope and Transferability
Often, consumers who have purchase extended warranties want to sell their vehicle. Understand if the warranty is transferable so you can make some of your money back on invoice. Also, some extended warranties are service center specific, and may require that the repairs and replacements done at a certain location. Make sure you purchase a warranty that fits your present and prospective needs.
Ready to peruse extended warranty products? Web2Carz provides you with a research tool to find the best extended protection plan for your needs!