Extended Warrenties

I wanted to talk about extended warranties. In theory, they are a wonderful thing. Celebrities star in commercials making us believe that you just take your car to a shop and all these wonderful things will happen, at no cost to you. In fact, that's far from true.

A good friend of mine bought a service contract from some company nobody ever heard of. They gave a long list of places that will honor their "warranty". He paid a couple thousand for it, believing that with his car, he's making a winning deal. His car did break down, but none of the shops on their list ever heard of that company. He was out all that money.

When you purchase one of those warranties, if you find an auto shop or dealership willing to work with it, prepare to be without your car for several days, even weeks. The shop will need to communicate with the warranty company, if they even answer the phone. 

The warranty company will require a compleat diagnosis before they will authorize a repair. This may require taking apart the engine, transmission, or other componets to find the exact cause of the malfunction. Sometimes they will even send an inspector out to verify the diagnosis. Most warrenties won't cover the cost of the tear-down. That cost comes out of your pocket.

I heard of a case where the vehicles turbo (not covered) broke apart. Some turbo parts flew into the engine (covered) and caused damage. First was the cost of the diagnosis, which we just discussed. However, due to the non-covered turbo causing the damage, even though the engine is covered, the claim was denied. That customer was out a couple thousand, plus had to wait quite a while for their car to be repaired.

Those warranties will play games with the shop also. They will tell the shop that they're only paying so much per hour, or for the job. That amount will be below the shops usual hourly rate. 

That shop has their expenses too. It's not all profit for them. Just like any business, they have rent/mortgage, insurance, payroll & benefits, cost of new specialized tools, data costs, electric, phone, and much more. So, who will make up the difference? You, that's who.

A family member bought a service contract on her new car. She brought it to her regular repair shop for a repair. However, her car only required an adjustment, not a part replacement. Due to that, her claim was denied.

I'm not saying all those companies are bad. When you purchase an "extended warranty", or "maintnence contract", or " service contract", always carefully read the entire contract. Know what exactly is and isn't covered. Don't be pushed, or rushed. Have someone you trust go over it with you if neccessary. Know exactly what you're signing.

One more thing. Never trust a company that's willing to sell you a warranty without inspecting your vehicle. That has fly-by-night written all over it.

Thank you for reading. Please feel free to comment or ask a question, and please share.

Carl