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Choosing an Automotive warranty


By Ray Prince, NorCalCars Writer

Used car extended warranties vary in range and depth. There has been much scrutiny over their importance, with numerous sources citing an uneven average repair claim to extended service contract cost ratio. According to Edmunds.com, one of the Internet's most highly reputed car review sites, the average repair claims against a $1,000 extended service contract come to about $150. However, many extended service warranties costs hundreds of dollars less. One repair can cover more than the extended warranty! In addition, the price for a warranty increases as your vehicle comes of age. Dealerships may offer everything from "as is" warranties (no warranty whatsoever) to a full 12 month and 20,000 mile coverage with drive train and bumper protection. Pound for pound, you'll find that 3 month and 3000 mile warranties are the most common with varying terms.

The Best Warranties Cover Exclusions

The No. 1 thing to look out for with used car extended warranties are coverage limits, where inclusions and exclusions are scrutinized. The best warranties list what isn't covered, not what is. Is wear and tear plus breakdown covered by your warranty? Note your car's general makeup. Is it an old Pontiac Grand Am prone to break or an Oldsmobile with expensive replacement parts? Breakdown policies are less inclusive than you may believe. Replacement parts may be excluded completely. An overheating clause might be slightly off kilter, but necessary if an expensive component like your radiator gets damaged. Since warranty plans vary from dealer to dealer, it is important to study your coverage’s inclusions and exclusions. Fine print varies from contract to contract. Who pays the claims for your coverage? Will your warranty cover your dealer’s retail labor rate?

Research your Warranty's Insurer First

After coverage soul searching, see who is behind your extended used car warranty. Usually, they're provided by the vehicle's own manufacturer or by a third party. According to Bengt Halvorson, a cars correspondent and reviewer for AOL, "third parties are generally priced lower but considered inferior to manufactured supported programs." This is a sentiment echoed by many experts, though the consensus is that there are many third party extended warranty providers who offer enough IF you do the research. While researching last year for a friend’s used car, I came across A.M. Best and Standard and Poor company ratings. These sites rate warranty programs under many levels, including their financial strength and consumer ratings. An "A" rating is ideal, anything less and a restraining order is in ...well, order.

Another reliable source for insurer ratings is the Better Business Bureau. It chronicles a list of past complaints thrown at insurers along with their resolve rate. Keep in mind that not many web sites are the actual car warranty administrators (the people responsible for paying your claim.) Read your coverage policy for the name of the insurer and plug its name onto Google, AM Best, and S&P for feedback. Another thing to look out for is necessary licenses and registrations. Don't settle for a sitting duck when you could own a warranty that abides by strict requirements for issuing licenses by the state. A Google search can easily reveal this information.

Don't Fall for Popular Misconceptions

You'll find that many unscrupulous dealers may try to offer you a dealer warranty instead of an aftermarket or manufacturer's warranty. This is an absolute no/no. For starters, dealer warranties require all the services and repairs on used cars to be done at one dealership, which is usually theirs. An out of town breakdown could render your dealer warranty worthless. Most extended warranty companies will give you free reign over repair facilities with no limit on number of claims.

As a newly minted used Pontiac driver 5 years ago, I held misconceptions over the whole idea of extended warranties. I asked myself if I would be facing double coverage with the extended warranty and the manufacturer's. This shouldn't be a concern. Extended warranties always consider your manufacturer's warranty (if there is one) and comes into play once it expires. Another misconception I had was that I had to buy a contract before leaving the showroom. This isn't true! Dirty dealers can pressure people into buying bad contracts with 100% plus markups, when you can buy months after your purchase. Always buy the extended warranty directly from the company to avoid paying double for the same terms.

All in all, used car extended warranties should be considered for those that want ease of mind from major repair expenses. Out of pocket costs can be avoided long after the manufacturers warranty has expired. Your best protection is a sound read of the fine print, research through independent feedback sites like AM Best, and most importantly an understanding of your car and its needed coverage.