by Rand Stuck
You’re on holiday, having a great time soaking in the sights and sounds with office and work far from your mind, when the vehicle you’re driving produces an awful grating rattle and stutters to a stop. You have a mobile phone, so you call for a tow to the nearest vehicle repair facility. Once there, you are told that a fancy, expensive, hard to get part is broken and the time and/or mileage limit of the factory auto warranty has lapsed. It’s going to cost you a pretty packet (obviously not part of your vacation budget) to get it fixed.
What do you do? If you have an extended auto warranty it may help. Of course, you still have the damaged vehicle, and the hassle that goes with that situation, but at least you have a warranty. In many cases, it is not the vehicle breaking down that causes the most anxiety and tension, but the expenses involved in its repair. As they say in the auto industry, “they all break,” and it doesn’t matter what brand of vehicle you drive, so why not be prepared?
If you want to save money, in the end the extended warranties may support you a lot. When you are leasing a car and are turning it in at the end of the lease period, you may not have to pay any extra cost. Whenever you purchase a car, you must want to choose one that suits your planned length of ownership. While purchasing vehicles, extended warranty seems to be costly. Some of them have a buy-back term that helps a cant lose investment.
As any suffering car owner will tell you, while maintaining a vehicle may be pricey these days, vehicle repairs can be truly back-breaking in terms of costs. Given the situation, if your extended warranty covers just one major repair bill, perhaps an automatic transmission failure, it will have paid for itself. Repairs to transmissions often cost almost the same as a re-manufactured unit, which means a replacement can easily set you back by $2000 or more. Or take an air-conditioning failure. Going by current repair costs, you will need to spend $700 or more to fix that one. So even with a $100 deductible you’re better off than paying the entire bill yourself.
An extended warranty contract is usually purchased along with a vehicle, though you may buy some contracts at a later date at no extra cost. As you sign your DMV and/or finance paperwork in the F&I (Finance & Insurance) department, you will probably be asked whether you wish to purchase an extended auto warranty. If you’re interested, you’re usually given the choice of either the manufacturer’s brand or an aftermarket brand of contract.
The offer of either the manufacturers brand or an aftermarket brand depends on the dealer. Some dealers offer only one brand of contract. A friend of mine had recently bought a vehicle, new Ford SVT Contour from a dealer who offered only aftermarket brand of contract. When asked about the Ford Extended Service Plan (ESP) he was told that the dealer offered only one brand of contract and did not have any information on the manufacturer-backed warranty.
My friend claimed to purchase only a Ford warranty based on my bold advice. Further, after a profound investigation the F&I person was able to give the required information. My friend decided to purchase the contract with its coverage considering all the cost of different levels of coverage and accumulating the mileage and his planned time of ownership. The F&I person admitted that it was the first time he was selling an extended warranty of manufacturers brand. He had to check and follow the Ford ESP policy book while filling out the required papers properly. Never accept no for an answer. If the name of a vehicle manufacturer company is on the structure, they must sell you that manufacturers brand of contract.
A dealership may claim to sell only one brand if they make more money on the aftermarket brand and/or that brand has a tie in with the dealer. Many dealers have their own brand of contract, in which they obviously have a monetary stake, with a fancy name to make it sound appealing. And it makes business sense for them to try to sell you only that brand and no other. Also remember that the F&I person’s commission may be connected to the brand of contract that the dealer is trying to sell you. Therefore, you should carefully explore all of your options based on what you want rather than letting the dealer talk you into buying excessive warranty coverage in order to earn a higher commission.
An important aspect to look out for no matter which policy you decide to buy is the ease of use if and when you do have to take recourse to the plan. If you buy the manufacturer’s warranty plan you will be able to use it at any authorized dealer nationwide. If you choose to buy an aftermarket plan you may be saddled with the task of taking it back to the dealer where you bought the plan.
So consider these questions: If you can use the plan elsewhere, how easy is it to use? Do you pay the repair bill up front and claim a reimbursement later? Does the company that sold you the plan offer any money to the repair facility via a credit card over the phone so that you don’t have to pay anything on the spot? How easy is the plan to use for the repair facility? If repair facility staff are kept waiting endlessly on the phone to get authorization, it could mean a major delay in getting your vehicle repaired. Will a representative from the auto warranty company have to come out and inspect the vehicle? If yes, it will add to the delay.
That is why manufacturer-backed extended auto warranties are the easiest to deal with for a repair facility, as they are already on the payment program. With these plans you never need to pay up front on a covered repair, except for your deductible. Repairs are almost immediately approved, except in very rare cases where an inspection is deemed necessary, and the entire process is much smoother. Naturally, such warranties also mean a lower financial load and quicker approvals, to say nothing of quicker repairs.
Once you find your suitable auto warranty, you will get different levels of coverage under the same brand of contract. Some of the levels are for the coverage of parts, some of the levels are for time and mileage, and some levels are for your amount of deductible. Take sufficient time to decide wisely the things you must consider while settling like your requirements, mileage and time factors. People who travel many miles within a short duration should go for high mileage plan for its cost-effective factor rather than a long time plan. People who keep their vehicles for an indefinite period should choose long time coverage plan with little mileage.
After deciding on your time and mileage, consider what parts coverage you would need, if the option is available. You may be offered levels of coverage that range from silver and gold to platinum or, for example, a powertrain plan that covers only the engine, transmission, and differential. The more extensive the list of parts that the warranty covers, however, the more it costs you. Therefore, make sure you get the best value by purchasing the coverage plan you need and can afford.
Finally, consider what you would like your deductible to be, again, if given the choice. You may be offered different levels for your deductible such as $0, $50, or $100, with little additional cost to upgrade from a $50 to a $0 deductible. If you have a difference of $200 between the $0 and $50 deductible levels, bear in mind that using the plan four times would pay for the difference in cost.
The deductible charged may be per visit or per repair. Clarify this point before you decide. Per visit means one deductible for any number of repairs on that same visit. Per repair means deductible for every single repair as the name suggests. You will have to pay a deductible for every item that is covered under the warranty that you bring in for repair.
To make the contract more flexible and feasible some features may be attached with the coverage; such as roadside assistance, covering items like tow service, in worst scenarios accommodation charges, food and other unexpected expenses at any crisis moment. Another feature should be buy-back clause, which helps you to get back a part of your money if your contract is not fully used. For the person who considers purchasing a warranty this clause sounds financially lucrative. Clarify whether the policy is transferable. If you want to sell the vehicle before the contract expires, this is the best option.
Though price is an important factor, you should keep in mind that you are adding the cost of warranty contract at the time of purchasing a vehicle. To minimize the problems, the cost of warranty is spread over the duration of your vehicle loan. The increment of couple of hundred dollars to achieve the next and better level of warranty coverage does not create much difference in budget. You should consider the best reasonable and affordable plan.
Some dealers mark up their costs over the recommended retail of extended warranty plan. You will never come to know whether the dealer is taking high price or retail price for the extended warranty. It is better to compare first with another dealer. Just like the flexible price of vehicles, you must negotiate the warranty plans cost too. After all, you are a reader of Edmunds.com.
Buying a vehicle is a major investment. Purchasing an extended warranty plan will give you the peace of mind you truly deserve even though you might never have to use it. A thoughtful action, though expensive in the short term will go a long way in preserving your sanity while on a much needed break, enjoying a vacation. You can continue your drive without a worry in your head.
About the Author:
Rand Stuck is a certified technician with over 13 years experience repairing BMWs and currently manages the BMW parts department for an online parts retailer. You can find more
Used Car Warranty information at
AutoWerks