Extended Warranty Tips - Part 2

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Extended Warranty Myths

"I don't need an extended warranty, I'm covered by the manufacturer".
When your Ford warranty expires, that's when all hell can break loose. You could be exposed to large repair losses. Auto extended warranties have benefits like towing, car rental, toll free assistance, trip interruption, lost key lockout. Once the manufacturer warranty ends, the extended warranty picks up for another few years. It's crucial to buy auto warranties early, right when you buy the car, it's the cheapest. Just like life insurance, the longer you wait, the more it will cost, so if you plan to buy a warranty, lock in your savings now while your car is young and healthy. Danger Will Robinson: As more repair data surfaces on your Ford, BMW, Kia, Dodge or Chevrolet for example, vehicles are placed into higher rate classes. Once you buy your extended warranty, your rate class can not change. Get it now, not later.

"I'll just buy my auto warranty at the dealer, it's convenient".
Wrong. It costs more at the dealer, who are just middlemen marking up your Ford Warranty that or Chrysler warranty which you an buy direct from a warranty company for much less. Car dealers often resell the extended warranty to you at 2 to 3 times what they paid. I get complaints from buyers whose dealers tried to sell them new car warranties for $3000-$5000. Dealers do not show you the contract in advance, so you have no idea what you are signing up to other than their verbal promise, or marketing slick sheets which are not contracts, and they leave out details that bite you in the butt later. Sure it's convenient to just buy an auto warranty while sitting at your Ford, Honda, or Toyota dealer, but it's also convenient to go online and buy a better extended warranty for half the price.

"My Car dealer told me I have to buy my extended warranty now or I can never get one"
Car dealers love to tell you this lie to force you into buying now. Once you leave, they lose their chance forever of selling you that Ford extended warranty. They make the most commissions on extended warranties, they want you paying interest on that $3000 BMW extended warranty too, which increases your auto warranty cost by hundreds, or even thousands of dollars. Buy your warranty direct from the extended warranty company.

Car dealer lies: "My car dealer told me the bank requires me to buy the extended warranty or I won't get loan approval"
With car dealer extended auto warranties, you often pay double for less coverage, no wear and tear or overheating. Some car dealers lie to you that you must buy a car warranty to qualify for the loan (see our Top 10 Car Dealer Scams). All extended car warranties can be refunded 100% in 30 days if no claims have been made. If you were forced to buy that Ford warranty or Honda warranty you don't want, get your money back. Other consumers complained to me the dealer sold them an extended auto warranty, but never sent payment to the auto warranty company! A car dealer should be your last resort to shop for auto warranties, after you get quotes from online car warranties. No matter what lies dealers tell you about me, they can't argue with my tips on how to choose the best auto warranty.

Do I need an auto extended warranty?
You must decide if you need that BMW extended warranty. The cost to repair today's complex vehicles is rising. If you lease your Honda for 36 months you don't need extended auto warranties, and it's a scam for a dealer to sell you one. If you got suckered into a 60 month auto lease, you should buy a Honda extended warranty, as you are responsible for all repairs. Auto extended warranties protect yourself from inflation later when you need repairs. Like insurance, if you don't buy it, you'll be looking over your shoulder. The most common repairs are A/C, transmissions, and electrical. Most people buy their auto warranty because they know 10 minutes after the car maker's warranty expires, the antenna motor will fail. That's $200-$1000. window motors cost $600-$1000. One covered failure can pay for the cost of the extended car warranty.

The better online extended warranty companies are safe and secure
Some people are nervous about dealing direct with online companies, falsely thinking they are safer buying an auto warranty direct from a dealer. You feel safer sliding over twice the money for an inferior product, to a stranger who is financing your Ford warranty, or your Toyota warranty into your car loan at up to 18% APR? Where's the safety in that? Also, car dealers often resell the same car warranty from the same direct car warranty company you are shopping from online.

Auto Warranties To Avoid

Extended warranty scam alert
Do not ever do business with extended warranty companies who call you in spite of your name being on the Do Not Call registry list. Avoid any company calling you with an auto dialer, often using computerized voices claiming, "This is the final notice. The factory warranty on your vehicle is expiring". They give you the impression they are related to the dealer or car manufacturer. The FTC calls these robo-calls. We hear about people who receive calls from warranty companies using auto dialers, which is violating federal law by calling you even though you have registered with the government's do not call list. If an unethical company is going to dishonor federal law to shove their sales pitch down your throat, how much more do you think they will dishonor your contract when it comes time to make a claim? Be sure to file a complaint with the National Do Not Call Registry.

Beware of warranty company TV and Radio advertisements
There are a ton of ads where an extended warranty company will say something like "you'll never pay for a covered repair again." The key word here is COVERED. Cheapo warranties won't cover the major items or have nickel and dime weasel clauses. Like I said, you must know exactly what is in the contract before you buy. These ads are designed to make you think you are getting something for nothing. Good extended warranty coverage will protect you from being blindsided by high cost repairs but you must know what you are buying.

While you shop for that Ford warranty, or your Honda warranty or whatever car warranty you end up with, I recommend exclusionary wear and tear auto warranties over cheaper mechanical breakdown warranties. Some failures might be wear and tear, not covered by a mechanical breakdown car warranty.

New car warranties are cheaper on dependable cars. Lexus warranties, Honda warranties and Toyota warranties are cheaper than unreliable cars like Kia, Land Rover, and Chevrolet. Do you own a Kia? Then it's a given, you better get that Kia Warranty. If you own a Chevy, you better buy an extended Chevrolet warranty. Warranty industry insiders informed us Chevrolet has a high failure rate, hence a high Chevrolet warranty claims rate. So if you bought a Chevy, do yourself a favor and protect yourself. Get yourself an extended Chevrolet warranty online now with a $0 deductible it will pay for itself. BMW cars can be very costly repairs if you don't have a BMW warranty. Remember, if you decide to buy an extended warranty, do it as soon as you buy your car, price goes up as the car gets older.

Is US Fidelis a good warranty? The answer is NO but luckily they are out of business!
People ask us if US Fidelis a good warranty or not since they had seen their ads on TV all over the place. Not surprisingly US Fidelis announced on December 29, 2009 that they have stopped selling new contracts. I say this isn't surprising because US Fidelis had an "F" rating from the Better Business Bureau at the time of this writing, with nearly 1100 complaints. In 2008, the Missouri Attorney General sued US Fidelis under their DBA: National Auto Warranty Services for sending consumers misleading postcards soliciting business. Matt Lauer did a video story on the Today Show about US Fidelis extended warranties. Just like there are both good and bad car dealers there are good and bad warranty companies. The important lesson here is to do your homework before you buy.

Sales Tactics from Car Warranty companies
During your car warranty quote process, notice how auto warranty companies treat you. Do they trash their competition instead of walking you through their own contract merits? Are they quick to point out BBB complaints of others? Do they redirect you from their own weasel clauses to meaningless items not covered by a competitor's car warranty contract? If an auto warranty company's product is as good as they claim they don't need to trash the reputation of a competing auto warranty company to make the sale. I get beat up weekly by extended auto warranty companies who want me to link to them, I've received nasty emails from immature company presidents when I reject them for not being good enough. It's competitive out there, companies lie about their coverage, trash their competition, and trip over each other to pay $5 a click on Google to sell you auto extended warranties.

ALERT: I get emails asking about many car warranty companies on the Internet from people anxious to get a warranty on their Chrysler, Dodge, BMW, etc. Based on our research of these auto warranties below, here is why we DO NOT recommend the following car warranty companies, but you should investigate yourself and decide:

• The Auto Club.com–Now Paragon Motorclub A former key employee from Warranty Gold is still selling extended warranties online. Warranty Gold, using a Cayman Islands insurance company, folded in 2004 leaving tens of thousands holding worthless auto warranties. A WHOIS on TheAutoClub.com showed the technical contact to be Warranty Gold's former GM. Dun & Bradstreet lists his name on a Warranty Gold Business Report. Google.com search results show he was a spokesperson for Warranty Gold as they asked courts to invalidate their obligations and extended warranties. They practice what we consider less than ethical selling practices. Requests for price quotes don't quote all rates and ask you to provide an email address or call. Emails they send omitted prices on all but lowest warranties. We reviewed their contract and found it to be restrictive and limiting, no wear and tear coverage most states, only mechanical breakdown. I got a quote last year, they spam me every week.
• Continental Warranty: A warranty broker, not a direct administrator, no online quotes or rates, 269 Better Business Bureau complaints the past 3 years (January 2008). They do not offer any bumper-to-bumper coverage, no wear-and-tear failures or damage due to overheating. WARNING -Will not allow you to read contract unless you put down a deposit.
• Aaautowarranty: Broker of coverage, not direct administrator, coverage from several small administrators. Displays seals on their web site that probably shouldn’t be there. They display an AM Best seal showing "A" for Excellent. Tricks you into thinking you are getting "A" rated insurance backing. But most of their warranties are only backed with "B" or "NR3" ratings, not "A". Looks like their plans exclude wear-and-tear failures.

Why most car dealer extended warranties are not as good as some online warranties
Dealers don't tell you if they're selling you a mechanical breakdown contract, not as good as wear & tear contracts. They are giving you half the coverage, and most car dealer auto extended warranties don't cover overheating. Then they slap their dealer label on your new Honda so you can be a moving billboard for their dealership. Now That's a scam!

Check The Warranty Contract Before You Buy, NOT After You Buy!
Don't leave a dealer with a false sense of security that you have an auto warranty protecting you from everything. Some warranties have so many weasel clauses you're lucky if half the claims are paid. Car dealer warranty exclusions are printed in the policy book which conveniently arrives AFTER you buy your Chrysler, because they don't want you to dig. The more you dig, the more you'll find. If they can't show you a copy of the contract, DON'T BUY THE WARRANTY! Sales brochures are not contracts. Lies form salespeople are not contracts. Before you buy you want to see IN WRITING "What is not Covered". Savvy car buyers bypass 200% markups of dealers buy directly from trustworthy online warranties at significant savings. Online warranty sites will email you a PDF file of the contract for you to view. Ask the dealer why they refuse to do likewise.

Backup for your auto warranty funds

Ideally, the administrator's claims reserve account is insured by an A-rated insurance company or a responsibly managed risk retention group (RRG). Not all RRG's are created equal. Your auto extended warranty is not insurance, so the financial strength of the administrator is crucial. They should insure the claims reserve account to protect you if they go belly up. This happened with Warranty Gold, and other no name auto warranties you buy at some car dealers. Administrators go defunct and leave you holding the empty bag. In addition to insuring the account, they should also reinsure it preferably with an American or large European insurance company rated "A" with A.M. Best (no small no-name offshore Caribbean deals). Hannover Reinsurance of Ireland is an acceptable international re-insurer, because of Hannover's $2 billion plus financial size, AM Best "A" rating, and Hannover is publicly traded on the NYSE stock market. If your administrator goes belly up, and the insurance can't handle all the claims, reinsurance kicks in. Hopefully there was enough reinsurance coverage on the claims reserves to handle all the claims.

You want an auto warranty company who will be there to cover your claims
You also want an auto warranty company with experience. WarrantyDirect deposits funds into an insured "Claims Reserve Account" to insure funds which are available to cover claims. Below are ratings of the insurance company who backs Warranty Direct. Many warranty companies won't give you this information. The order of importance of protecting you is

1. Financial strength and competency of the auto warranty administrator
2. Insurance company backing the auto warranty administrator

Example: Warranty Direct:

Warranty Administered By: Interstate National Dealer Services, DBA Warranty Direct
Insured By: Dealers Assurance Company (A- Excellent A.M. Best rating)

Common repair costs with 2010 pricing, and expected costs in 5 years:

Engine - $3254-$4750
Transmission - $2738-$3275
Brakes - $1050-$1525
A/C System - $1322-$1752
Radiator - $692-$1101

Beware of repair shops that refuse to work with your warranty company
There are a few scam artists out there. Before your warranty pays the service shop, they ask for a detailed written estimate of the repair, the parts, and the labor from the repair shop. They know if the repair shop is overcharging standard repair labor hours, or forcing extra parts on you that you don't need. The guilty shops lie and tell you they don't like your warranty company because their "checks bounce". Leave that service shop immediately.

Chrysler extended warranty
I checked the Chrysler site to get info about the Chrysler warranty, but could find no information about Chrysler extended warranties. You have no idea what you would be signing up to when you buy a Chrysler warranty.

GM Extended Warranty (Major Guard Protection Plan)
Searching for details on the GM warranty, I viewed a poorly disclosed GM extended warranty site for contract info, the site says "see your local GM dealership." Go visit the dealer, and ask for GM extended warranty details, they say you'll get it in the mail with your GM warranty agreement. Thanks for not letting us see all the terms of our GM warranty BEFORE we buy.

Ford Warranties: Cost Effective? Not Sure
I get asked a lot if the Ford Warranty, the Honda Warranty, the Toyota Warranty, etc., are any good. A few years ago a Ford dealer had sold my friend a Ford extended warranty on his 1997 Ford Mustang at $1100 for 2 years and 39000 miles beyond the standard warranty, creating a 5 year 75,000 mile plan. They hyped the "extra 39000 miles" extension to his Ford warranty, a farce, as he reached 2 years before 39000 miles. WarrantyDirect quoted 1/2 the dealer's price for a better Ford Warranty with more coverage.

Why many car dealers sell cheap 3rd party extended warranties
Why did your Ford dealer not sell you a Ford extended warranty? What about your Honda dealer with no Honda Warranty? Or your Toyota dealer with no Toyota warranty? Car makers dictate how much they'll pay the dealer to perform repairs. Sometimes these conditions are not in favor of the dealer, so they look to cheap 3rd party extended auto warranties that provide better profit margin for them. Some car warranty companies are not backed by insurance or claims reserve accounts, and go out of business, and you lose. As contracts expire, the remaining reserve dollars and any earned income belongs to the dealer.

Problems I had with my GM Warranty
The dealer will say you'll get car rental reimbursement with your GM extended warranty. You may find out later, it's not during the 3 year standard GM warranty. I got stung by this the first year I owned my Trans Am. The GM warranty refused to pay me $650 for car rental bills, saying it was not covered. So why did I buy this GM warranty? Why did the GM dealer lie to me and say that anytime my car breaks down I get rental coverage under this GM Extended Warranty? Check your auto warranty contract, look for the section titled "What is NOT covered", and the obscure phrase "any repair covered by the standard warranty". GM car dealers hype car rental reimbursement that you cannot use. It's more like roadside Ass-istance.

It is industry standard procedure to sometimes not use original parts. Not a problem. But GM went over the line with me with my GM Protection Plan. In 1994 Pontiac repaired a hole on my fuel tank seam under the extended warranty, but they should have replaced the tank instead. Why take a chance with someone's life? They repaired it, 2 months later I'm back, same problem. They fix it again, 2 months later, it's leaking again. I take it to another shop and discover Pontiac had welded a penny to the tank as a plug! Copper is corrosive! They refused to reimburse me. GM's complaint line was a joke, offering to replace the tank if I paid them $500. How generous. Once I got the State of Florida Attorney General's Consumer Affairs Division after the dealer, they reimbursed me only $300 worth of parts for my car, even though I spent hundreds on car rental, and a new tank. So save all your records in a notebook. That's why I drive a Lexus now, I got sick of that "great GM feeling". That Pontiac dealer has since gone out of business.

Don't be fooled by the Manufacturer's 100,000 Mile "Limited Warranty". You don't have full coverage and you can lose thousands of dollars in uncovered repairs
Many manufacturers like GM, Hyundai and Kia are advertising very high mileage warranty coverage. But don't get suckered in by the headline hype, don't focus on "5 year warranty" or "100,000 miles", you should focus on the words "limited warranty". These extended warranties are not full blown bumper to bumper extended warranties as they would have you believe, rather they are "LIMITED" powertrain warranties. A powertrain warranty does not cover the parts most likely to break on your car, which is why the manufacturers are so quick to offer them. For example, here is how the GM warranty works: After 3 years your standard full coverage GM warranty expires and their "limited" extended warranty covering only the power train kicks in for 2 more years with a lot less coverage. Once the smoke clears, they are only giving you a 2 year extension on the power train warranty and little else. The fact that it's a "named component coverage" and not exclusionary bumper to bumper is proof of it's limitations. I noticed a couple of weasel clauses for them too; they don't explicitly cover wear and tear so expect your claims to be rejected as "wear and tear failures." They have a weasel clause for "poor quality fuel". By whose definition? What if you use 89 octane gas instead of 93 octane to save a few bucks when gas hits $4 per gallon? Will General Motors dealers reject your repair? While the GM extended warranty is an improvement, the headline hype has you thinking you have a full 5 year umbrella protection warranty, when in fact you are left exposed for numerous uncovered repairs due to gaping holes in the coverage. You should consider protecting your investment with a wrap warranty available from CARCHEX or Warranty Direct's PowerWrap+ to cover these gaping holes left by a manufacturer's limited warranty like A/C, electrical, Luxury, navigation, DVD players, brakes, cooling systems, emissions, fuel system, the stuff that most commonly fails after 3 years. Engines and transmissions are usually reliable so the manufacturer will hardly ever have to pay out on this, and they have excluded the items that do fail the most after 3 years. A good wrap warranty is the perfect solution for you because it costs less money and only needs to cover just the items left out by the manufacturer's limited warranty.

After You Buy Your Extended Car Warranty
Your work is not done. Auto extended warranty contracts warn you to maintain your vehicle according to the manufacturer's instructions in the owner's manual, perform all the required maintenance, oil changes, fluids, etc., and only use approved parts and liquids, you know the drill. So buy a 3 ring binder to store all your receipts as proof that you had all proper maintenance performed. Every oil change, I just add the receipt to the notebook. Some car warranty companies are strict, and use it as a weasel clause to avoid paying repairs that should be covered. Some car warranty companies have maintenance logs in their contract books that you log each service performed on your car. Your owner's manual has maintenance schedules for "normal" and "more severe" driving conditions of your car. You are required to follow the maintenance schedule that applies to your operating conditions.

My car has high mileage, can I still get an extended warranty?
Yes, Warranty Direct's PowerShield is a comprehensive, low-cost, major component coverage designed for older and higher mileage vehicles with up to 175,000 miles on the odometer (Not available in CA or GA). PowerShield and covers mechanical breakdowns for items such as the Engine, Transmission, Drive Axle, Timing Belt, Water Pump, Fuel Pump and more, benefits package featuring 24 x 7 Emergency Roadside Assistance, car rental reimbursement and travel interruption expenses is also included. As far as I know, no other companies offer wear and tear on vehicles with high mileage. If you are buying a 3 or 4 year old used car, that's when the manufacturer's car warranty expires, all hell breaks loose with your car, and you need protection. Can you afford a $750 radiator repair? You are exposed to potentially large losses. If you can't get a high mileage used car warranty coverage for your car, then I suggest you put $2000 into your own claims reserve account, to fund your own future repairs on that used Ford you just bought.

Used Car Extended Warranties

Used car extended warranties are available. Most used car warranties, only offer their bumper-to-bumper coverage for vehicles with less than 50,000 miles. With high mileage cars, your used car extended warranty only covers half your failures. Luckily, in 2006 Warranty Direct began to offer PowerShield, for older and higher mileage vehicles with up to 175,000 miles on the odometer.

If you buy a used car, you absolutely must get a CARFAX ^® Report on the VIN and have a mechanic inspect the car on a lift. If you do not do both of these, then do not buy that used car. You have been warned. When purchasing a used car, it is a good idea to check and see if there is a warranty already in place. This can also be a good negotiation tool for the buyer. You can purchase an extended warranty right before the manufacturer's original warranty runs out. By getting a Vehicle History Report on the car, you can determine if it has or had a salvage or junk title in its past.

Buy the most complete coverage auto warranty
Some companies charge extra for high tech sensors, ABS, emissions systems related components. Better warranties like the top plans from companies like CARCHEX and WarrantyDirect.com include coverage for your mass air flow sensor, oxygen sensor, MAP sensor, and knock sensor. I recommend that you buy the top plan, usually called "bumper to bumper", or "exclusionary bumper to bumper package". If you get a plan that is not an exclusionary bumper to bumper plan, then many expensive parts on your car might not be covered. Some sensors cost hundreds of dollars.

Are my MacPherson struts covered by the extended warranty?
The better auto warranties cover MacPherson struts, but not the inserts. These inserts can be thought of as shock absorbers, which no one covers, as they are a maintenance item. Some warranties won't cover your struts at all.

Don't buy an auto warranty to cover pre existing failures. Don't file a claim within the first 60 days!
When you buy a used car with no pre existing conditions, the car runs fine with no issues for several months. These are accepted odds by warranty company actuaries. When abnormal things occur, red flags go up. When you sell your used Ford, you don't have 4 parts break in the first 30 days. If this happens, industry standard red flags go up. Contracts have verbiage that even if your car was an inspected prior to selling you a warranty, it can still be shown to have a pre-existing condition. Don't buy a problematic used car expecting the auto warranty to cover repairs. They are a lot smarter than you. I tell people don't file a claim within 60 days to stay off the radar map and avoid triggering red flags. Warranty companies know that 90% of the claims filed in the first 30 days are fraudulent claims on pre-existing failures, that can often be proven by independent inspectors. Do not test this rule, and do not email me to complain when you file a claim within 60 days and it gets rejected. I hear from people all the time who do this and get burnt in the end.