Buying
an Extended Warranty
by Austin Davis of TrustMyMechanic.com
Reader
Question: Should
I purchase an extended warranty contract?
Dear
concerned car owner,
In
my opinion extended warranty contracts usually don't
pay for themselves. In my experience I have found that
most of the contracts that I had to make a claim on
paid very little-if any-of the repair cost. Most of
the contracts will list excluded items, and unfortunately
those items are usually what will fail. The parts that
are covered by the contract are not parts that have
the problems. I find a lot of the contracts list a lot
of covered parts, but most of the parts on the list
are not applicable for the cars on the road today.
The
other day a customer showed me the extended warranty
contract that she was considering and I could only find
four items that pertained to her car that would be covered.
She would still have to pay a deductible for each claim,
and the policy proved to not be a good deal for her.
Take a copy of the policy to your mechanic and get their
opinion. The mechanic is the one that will be talking
to the claims department anyway, so you might as well
find out if your mechanic would want to do business
with the warranty company before you buy.
I
personally do not like to talk to the warranty company
on the phone. They ask me questions that I am sometimes
not in a position to answer, like "what was the
cause of the brake master cylinder failure." If
I knew that I could design one that would not fail in
the first place. They usually want me to negotiate my
prices to "fit" their pay policy, and tell
me what parts they will pay for and what parts are not
covered.
The
overall feeling that I get when I do business with most
of these extended policies is not a very pleasant one
for me. I will accept them from my loyal and regular
customers, but if you are a first time customer and
want me to make a claim for you, I might pass on the
job. Read the list of covered parts, if you do not know,
or have not heard of, most of the names listed, then
it is probably a bunch of hype to make the contract
sound highly technical and impressive to the layman.
The
list sounds great and fills the page, but there is no
real protection for the consumer. If a covered part
does fail, the shop has to call the claim office and
talk to a representative and give an estimate. This
sounds easy, but it can become a bartering game between
the shop and the claims officer about what the parts
cost, or the shop's labor rate, or any other part that
was damaged by the failure of the covered part.
This
can take some time to process and get the claim approved
and will not be very rewarding for the shop, and eventually
for the customer. There will be a deductible to pay
by the customer, and on some large claims the warranty
company might send out an independent appraiser for
on-site inspection before giving the authorization to
repair.
I
have seen the warranty company pay for a broken water
pump but not pay for the broken timing belt that was
caused by the faulty water pump in the first place.
In this scenario the warranty company paid $120.00 and
the customer paid $290.00 to cover the cost of the timing
belt.
Remember,
you are dealing with an insurance company, and they
hate to pay claims! I think it is better to put the
money that you would have spent on the contract in a
"car repair" mutual fund account and hope
you don't have to dip into it very often. If you are
buying a Jaguar or BMW or something along those lines,
then I might consider buying the extended warranty,
but if you are buying a Honda Accord, then I think you
will be wasting your money.
Now
please understand that there are always exceptions to
the rule. I have a few customers who feel they have
gotten their money's worth from their warranty contracts,
but they are the minority.
(P.S.
From my experience, a Honda Accord is one of the best
cars to own. They are well built and reliable, as well
as relatively inexpensive to purchase and maintain.)
If
you own a BMW or Jaguar you might need my next book
When Your Car Repair Bills Exceed Your Mortgage.
Sincerely,
Austin
C Davis
