Extended Warranties

…and Their Dangers

Extended warranties have been around for years, well before the scam calls started. We’ve actually heard a few legitimate advertisements for them recently. Many customers have asked us, should I buy an extended warranty when I purchase my next car? And we thought it would be prudent to give some advice on things to remember when making your decision. Let’s take you through an actual process with aftermarket extended warranties from our experience and let you decide if they are worthwhile for you.

The first step is always the purchase. Most customers that purchase extended warranties are told “all” repairs are covered and that rental cars are covered etc. There are always exclusions and provisions to this which if you do consider buying a warranty we recommend reviewing vigorously. It’s also important to note that “repairs” are different from maintenance which will need to be done in order to keep the warranty active. Therefore you are still paying for all oil changes, tire rotations, fluid exchanges, and more. Also on most provisions lists are items that are designed to wear out like tires and brakes meaning you will still be paying for those upkeep expenses too.

Once you purchase the warranty, as we said earlier, it really only gets used in major repair cases. Unfortunately, your vehicle usually breaks down at the worst time, and that’s when the frustrations begin. Most warranty companies will not cover the towing to a shop, the diagnostic to find the problem, or the rental car you were promised until the repair needed is confirmed to be a covered item. Many times they request components to be torn down to point of failure (i.e. spending hours of labor to remove half the engine to show the condition of internal parts) which you could be responsible for. Once the point of failure is found many times the repair shop and you have to wait for the warranty company to send an adjuster out to verify the claim which could take days to weeks. All this time you are still without a rental vehicle. Then once the claim is accepted the warranty company will talk to the repair shop and say what they are willing to pay for the repair- the only problem is that rarely lines up with the repair shop.

We, as professionals, are held to a high standard of repair. We are liable for any part that we install on a vehicle and must make sure it is safe when you leave. Therefore, when a warranty company implies that they will pay less than retail for a repair because they can find a “cheaper” part, it makes many shops uncomfortable because they are taking an immense risk for less money. In addition, many warranty companies will try to limit labor amounts which the amounts they suggest sometimes would have us to lose money. Therefore, most shops will charge the difference in repair prices to you as the customer. For us personally, as a shop we do try to fight on your side and get as much covered as possible, even appealing the initial decision but, usually, we only can get a few more dollars. Therefore, it is another way you may be coming out of pocket for a “covered repair”.

In summary, we have to remember that these aftermarket warranties are businesses too. If they did not make money they would cease to exist. So, when you make your cost-benefit analysis remember that you may not have everything covered that you think, there may be time hassles, and only in very rare cases will you see a return on investment that equaled the initial payment you made.