Extended Warranties - Worth The Money Or Ripp-Offs?
July 28, 2008
Extended warranties apply to automobiles as well as other consumer products. They are normally not worth their cost. In fact, these “Extended Warranties” are not warranties at all. They are more properly called service contracts. These agreements are usually sold by car dealers for $1,000 to $3,000 with a new vehicle. Through a service contract, you pay an independent warranty company, an administrator, up front to pay for repairs for covered problems with your car in the future.
A car dealer will try and pressure you into paying for a service contract by suggesting that repairs will come up after the warranty expires and you’ll save money by buying this contract. A service contracts are usually a huge source of income for the car dealer. Typically 50 percent of the money goes straight into their pockets. The reason for this is that the coverage is usually not at all what you expect.
Usually these contracts don’t cover the following:
Lack of Maintenance Records? Failure to retain and produce records that the vehicle was maintained in accordance with the manufacturer’s routine maintenance schedule. It is generally not enough to just maintain your vehicle. You must also be able to provide proof to the service contract administrator that the vehicle was maintained. No proof equals no coverage.
Consider wear and tear parts. Things like brake pads, shoes, hoses, even shock absorbers are considered items that normally wear out and are usually not covered. Anything they can be considered normal wear and tear is generally not part of the contract.
Breakage of a noncovered part. Damage caused by non-covered parts are not included in your contract coverage even if they do cover items that are under contract. For example hoses are not covered by the contract, so if a hose breaks and causes major engine damage it won’t be covered even if major engine failure IS covered.
“Exploratory surgery” . In most cases, there is a fair model labor involved in discovering what the problem is and this will only be covered if the problem turns out to be a covered part. Otherwise you’ll end up stuck with the bill. In the garage may not even start on the work until you paid for the labor front.
Limited repair options. You may have a hard time getting repairs on your vehicle, because the service contract limits where you can have the repairs done. The agreements sometimes severely limit who can work on your car by restricting the repairs to a certain number of places. On top of that, some service contract providers have a bad reputation in the service center won’t even honor the contract. They’ll ask you to pay for the repairs, and you have to try and get reimbursed for yourself.
With all of the above hurdles, it is hard to imagine receiving any peace of mind if you actually need to use your service contract. Additionally, with the quality of today’s vehicles the odds of needing a major repair during the first six years of your car’s life are slim. The bottom line is to save your money. In most situations you will be farther ahead monetarily and have greater peace of mind by saving your money for a rainy day.
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