Auto Warranty

Extended Auto Warranty Tips

Summary: More and more people are putting off purchasing a new car, and attempting to keep their used car running until economic times improve. Purchasing an extended car warranty is a great way to protect yourself from major repair bills which would have otherwise drained your wallet. Read below to learn how to shop for an extended car warranty and get the best price and coverage.

There are many choices when it comes to a used car warranty or more correctly called an auto service contract. Most dealerships will sell a car warranty at the time of sale, but be warned, they get a kick back from the contract so you are not getting the best price. There are plenty of online sources for a car warranty, we recommend:

• Warranty Direct - Free Extended Warranty Quote

After you have read the information below, consider getting a quote.

What it is an extended warranty?

An extended warranty on a vehicle is a service contract just like the type you can buy for your refrigerator or TV. It provides coverage for certain items in the vehicle after the original warranty expires for a specified time or mileage reached. It requires that the vehicle be maintained per the recommended service schedule for the vehicle with records to show that the maintenance was completed. As your vehicle’s mileage increases and approaches 100K miles, it will be more difficult to find a provider willing to offer a contract.

There are two basic types of coverage offered: wear and tear and mechanical breakdown. Wear and tear covers items that wear out faster than normal such as engine components. Mechanical breakdown covers major components that do not normally fail over the coverage period, e.g. transaxles and engines. There are many levels of coverage offered ranging from only mechanical breakdown to the most comprehensive coverage including emissions, entertainment and navigation systems.

Four major coverage levels or plans are marketed but the items included do vary between providers’ plans. Most providers offer several if not all four of these plans. These plans are listed below in increasing coverage level:

• Major Item: covers only major items for mechanical breakdown and may cover some wear and tear items.
• Named Component: items covered are listed and can be touted as ‘bumper to bumper’ but usually exclude some parts.
• Bumper to Bumper: also called exclusionary since they cover so many parts that they list only the parts that are excluded.
• Luxury: combines bumper to bumper with coverage for luxury items such as entertainment and navigation systems.

Why you should get an Extended Warranty

The most common reason for getting an extended warranty is peace of mind and protection from large repair bills as the vehicle gets older. However, the reliability of vehicles has improved significantly over the past 15 years causing the average buyer of an extended warranty to spend $300 more on the premium than claims covered(per Consumer Reports in an April 2008 article.) CR found that an extended warranty could be worthwhile if you buy a less reliable vehicle based on members’ experience. These less reliable vehicles are Jeep, Pontiac, Buick, Chrysler, Dodge, Mercedes-Benz, BMW, Ford, VW, Saturn and GMC in increasing reliability rating. If you’re considering the purchase of one of these vehicles or you just want the peace of mind that you’re covered, then an extended warranty can be the way to go. Also a transferable contract can be a good selling point if you sell the car before it expires.

When you should get an Extended Warranty

Most car buyers don’t think about an extended warranty until they hear the pitch for one at the dealer during the final stage of the buying process. Consumer Reports suggests that you wait to shop for an extended warranty until 6 months before your regular warranty expires. By then you will know if you want to keep the car long enough and if reliability is a concern such that you want to consider an extended warranty. Although by then the contract price may be higher, it is cheaper to forego it then than to have bought the contract at the car purchase date and not need or use it.

Where to get an Extended Warranty

Dealer

Most extended warranties are purchased at the dealer at the time of vehicle sale. Most new car dealers sell the manufacturer’s extended warranty plans. These are generally more expensive but you eliminate the concern that the administrator of the contract will be around when you need to file a claim. Smaller administrators of extended warranties still do go bankrupt from insufficient claim reserve funds.

Some new car dealers sell non-manufacturer warranties at slightly lower cost for several reasons. Usually the dealer’s commission or overall profit on a contract is higher for a third-party administrator than for a factory plan which may pay a lower commission.

On-line/phone

Ideally, you think about getting an extended warranty before you buy the new car and you either decide to wait until the regular warranty is close to expiring or you look for a lower cost warranty to compare to the dealer’s offer. There are many on-line sites offering free quotes for extended warranties. They usually provide the basic information for each plan. We recommend Warranty Direct for your online warranty needs.

Selecting an Extended Warranty

Decide on the coverage you want

First, get some quotes on the different plans offered by several providers either on-line or by telephone from a local agent. See what you get coverage-wise for the cost to help you decide what level of coverage you would like.

Also research the repair history of your vehicle to highlight any systems that are frequently repaired. You will probably want these covered by the warranty you select. Consumer Reports publishes repair frequency data by model for the past six years in each April issue as well as on-line. If you’re not a subscriber, you can become an on-line subscriber and access this data very quickly. There are other car repair databases compiled each year and can be found in bookstores and on-line.

When comparing plans, calculate their annual costs over the actual times in effect, not the total time since purchase if a new car. Don’t be fooled by the pitch at car buying time that the contract is for 8 years/100K miles, when it only starts when the new car factory warranty expires. It may be in effect for only 5 years or 64K miles if the factory warranty was 3 yrs./36K miles.

Some plans say they are a higher coverage type but exclude some items usually included in higher coverage plans. Therefore, it is very important that you compare plans very carefully before making a decision. Insist on seeing a contract for comparing plans before making a final decision.

To lower the cost, consider a contract with a $100 deductible. But be sure it applies to each overall claim and not to each part repaired or replaced.

Claim Issues

Check that the repairs can be done at any ASE certified repair facility and not only at the dealer where the contract was purchased. Make sure the contract administrator pays the repair shop directly preferably by credit card to avoid a delay in repairing the vehicle.

Check if a part is covered if its failure was caused by the failure of a non-covered part. Some plans including some manufacturer contracts do not cover this type of failure.

Check the definition of the term ‘reasonable cost’. If it is vague, you may find it difficult to get full payment of the repair from the provider.

Also, be aware that if a tear-down is done to determine the failure cause and cost of repair and the failure is not covered, you are responsible for the tear-down charge as well as the repair charge.

Also, you won’t find normal wear items such as brake pads, rotors, belts, hoses, glass, and lenses covered by the plans with wear and tear coverage.

Be sure the contract provides car rental and towing if you don’t have it with your standard insurance policy.

Checking out Providers

Extended warranties can be marketed and sold by one company with the contracts administered by another company. The administrator then must either be insured by a property and casualty company or create a claims reserve fund to insure solvency. Check the rating of the insurance company covering the administrator. An A rating is desired to be confident the administrator will be around until the end of the contract. Be leery of an administrator that is not insured and has set-up a claims reserve fund as it is difficult to assess whether it is sufficient.

Get a detailed contract to review before purchasing a contract. If you cannot review the contract before buying, move on to another provider. Also be sure that there is a 100% money-back guarantee for the first 30 or 60 days of the contract if there is no claim and you change your mind and want to cancel it.

You can check companies offering extended warranties at the Better Business Bureau’s website, bbbonline.org, to see if they are accredited and their BBB experience rating even if they are not accredited.

Negotiate a lower price

Yes, you can bargain and lower the price for an extended warranty! 75% of extended warranty buyers surveyed by Consumer Reports negotiated a lower price. CR says to go with the $100 deductible and get the price to 1-2% of the car cost per year.

Consider yourself an expert on car warranties now ! Don't forget to get as many quotes as you can to assure you are getting the lowest price and best service. Visit our recommended sites today and begin your quest for the perfect car warranty.

• Warranty Direct - Free Extended Warranty Quote