Extended Warranty

Jeff, I just got ripped off on an Extended Warranty by the dealer! What do I do now?
Don't email us, do something about it! As you will learn in this chapter, a third party extended warranty (technically an Extended Service Plan) can be significantly cheaper than what a dealer sells you for equal or better coverage. You might think it's too late to save, but you can always cancel an extended warranty. The amount that you get back will depend on several factors. The longer you wait, the lower the refund will be. Keep in mind that the dealer will lose their commission on the sale of that Extended Warranty, and will try to convince you to keep it at all cost. If you found CarBuyingTips.com quick enough, some states/warranties have grace periods during which you can cancel the warranty and get a full refund with no cancellation fees. So, get out the warranty paperwork, read the fine print and use the information in this chapter to save some money.

Some people tell me extended warranties are a waste of money, what should I do?
People who say that have not thought it through. It's like insurance, maybe you'll need it. Bidders on eBay will pay more for a used car with a warranty. Most complaints from people about warranties are their own fault for buying the wrong coverage plan, and under-covering their car with an inadequate contract that doesn't cover wear and tear. Others bought from postcard mailings, not researching the warranty company first to verify it was financially solid. People might use these excuses to talk you out of it. With rising repair prices, you need some protection, and with the education you get here, you'll choose the right vehicle service plan from the right company that won't let you down. During tough job markets, you can't afford to be unemployed, then have your car die with no warranty to pickup your repair bill. A good vehicle warranty provides certainty for you in uncertain times. I deal with many unemployed people at our church whose cars die, and it prevents them from getting a job, driving to an interview, or gets them fired from a shaky job when they can't get to work. It's a devastating scenario striking during lean times which can be avoided if you buy your extended warranty when you buy your car during the good times. Poor people end up with unreliable used cars, many times they cry to me that their transmission died and it's $3000 to repair it and they are dead in the water. There are more reasons to buy an extended warranty than not to buy one. We'll guide you in the right direction.

The warranty sold to me by the car dealer is safe, isn't it?
Guess again. Some auto warranties, also known as vehicle service contracts, sold by car dealers require you to have your repair work done by the dealer. What do you do when the dealer or warranty goes out of business, and you're left holding the empty bag? Many dealers closed after the 2008 recession. Brands like Pontiac and Saturn are gone. You can be left without a safety net when your local dealer closes. We often hear from people who bought a no name car warranty at the car dealer, and the warranty went belly up. You are better off buying right from the source with discounted pricing.

I can't afford to pay for my extended warranty, but I don't want to be without one. Can I finance it?
Yes you can finance your warranty purchase, making it easier for you to buy it, while ensuring you'll have protection on your vehicle, so ask your warranty company about zero percent financing. This is much better than the dealer, who often finances it into your 15% APR car loan. Why pay 15% APR when you can pay 0% APR? Now you have no excuse for going without a warranty just because you're a bit short on cash flow.

California Resident? Extended Coverage Is Available for you!
WarrantyDirect offers extended coverage for California residents. They offer 3 levels of coverage & 3 deductible options. Make sure you ask about the 3 optional warranties (these are amazing and add only $110 to the cost). Policies are issued by General Fidelity Insurance Company (AM Best A- Excellent rating). Click here for a California quote from WarrantyDirect.

WarrantyDirect also has a warranty for older higher mileage vehicles up to 175,000 miles on the odometer
Called PowerShield, (not available in CA or GA, and excludes some high performance vehicles). This is great news for all of you buying used cars with high mileage. PowerShield 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. 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. So buy that used Ford, buy that used Honda and Toyota, then put a high mileage extended warranty on it. Most warranty companies will not cover Land Rovers because of high rate of repairs, and high cost to repair them.

It is possible to get coverage for Land Rover and Jaguar
Most companies refuse to cover these vehicles due to reliability issues and the high cost of repair.

Some cars you just can't get an extended warranty company to cover them
People ask me why the warranty companies refuse to offer them a warranty on their high performance cars. You won't find many warranty companies willing to offer coverage on vehicles like Land Rover (poor quality, frequent and expensive repairs), Mercedes AMG ($20,000 engine), and some turbo engines like Porsche, etc. If a warranty company turns you down, don't ask me why, I don't know. You should ask THEM. If you do find a warranty company that covers these cars at NORMAL prices, you can bet they won't cover wear and tear failures, and they'll try to get out of paying for any repairs. My best advice for you if you have a high end car which no warranty company will touch, then create your own claims reserve account, putting $5,000 into a money market account or long term CD, and send me $100 for giving you that tip! Then you can be your own extended warranty administrator.

Some warranty companies may require inspection on used cars before selling you a vehicle service contract
Sometimes a warranty company wants to make sure there's no pre-existing conditions on your out of warranty used car. Some of the higher quality extended warranty companies may require that you let them send out an inspector to look at your car first. Once your car passes this screening, they sell you a warranty. It's worth the effort to get your car covered, now they can't deny claims for pre-existing condition. If your car fails the screening, all is not lost, just repair the item that caused it to fail, then it passes the screening, and you're golden. One such case just needed an $80 AC gasket to be replaced and he was in business, and the company then covered his vehicle.

Don't be a victim. Get a free online auto warranty quote BEFORE you go to a car dealer to compare, not after
As you get quotes from a few warranty sites such as CARCHEX, WarrantyDirect and NationWarranty get your name and car info into their database, so when you call back with questions, you can easily retrieve your quote information without having to retype it all in. This streamlines your cost comparisons, so you don't misplace papers, it's all electronically stored.

You should know... Car warranty companies pay to have their links here. It keeps our site running free for you to use. We chose those we have known for years and thought were honest, give you good car warranty coverage, with a track record of paying claims. I'm also a big pain in the butt to auto warranty companies like CARCHEX, WarrantyDirect and NationWarranty. I hold them to everything they say, and we often work with them and the consumer to resolve questions. You expect us to be warranty gurus and we deliver, researching deeper than other consumer advocate sites, we visit the warranty companies personally, review their financials, government audits, actuary audit statements, and verify they have enough funds in their claims reserve accounts to cover your repairs. The extended auto warranties here will do good for you. Dealers tell you I'm making a buck off you with scare tactics. We are here to keep you from getting scared! This page has been online since 1997, before I had advertisers. One scam is when a car dealer sells you an extended warranty, then without your knowledge, cancels the warranty, and has the funds refunded back to them.

Attention Canadian Residents Buying Extended Warranties!
Lots of Canadians ask me, "Who can I get an extended warranty through in Canada?" WarrantyDirect is currently available in Manitoba, Newfoundland, Nova Scotia, Ontario, NW Territories, Nunavut, Prince Edward Island and Yukon provinces. See our chapter on Car Buying In Canada for more info, and car buying advice for Canadians.

Auto Warranty Definitions

Extended warranty
An auto extended warranty is a vehicle service contract between the car warranty company and you. When you buy your Ford warranty for example, they pay for repairs to your Ford covered by the contract. Extended auto warranties are NOT insurance policies. Your service contract money is deposited in a "claims reserve account", insured in case the administrator goes belly up. An auto extended warranty is the most confusing, profitable product car dealers sell. The language is tricky, and if you don't understand contracts you're in trouble. Many people erroneously think they will get double warranty coverage by waiting until the manufacturer warranty expires to buy their extended warranty. This is wrong, Auto extended warranties simply extend the original manufacturer's car warranty beyond the standard warranty period, they do not give you double coverage. The sooner you buy, the cheaper it is. Should you buy a warranty for your new Nissan or BMW, or that new Dodge or Chrysler? Those Nissan Xterra SUVs can be costly to repair. Look how fast repair shop labor hour rates are rising, and today's vehicles have more expensive gadgets like DVD, power roofs, navigation and Bluetooth. When those fail you'll pay thousands whether it's on a Toyota or Honda or Ford. It's given, these items will fail and you will spend money. I prefer to spend it on my warranty now at the lowest price, than to spend thousands later on a BMW repair. What if you drive Hyundai or Kia? Come on, a Hyundai warranty is in your future. Sure their quality has improved but still...

Warranty Administrator
This is the company responsible for paying your auto warranty claims. Be careful, it is often not the company you buy coverage from. We recommend a company like WarrantyDirect or where you are dealing directly with the administrator. This way you can research their claims handling history before purchasing a warranty. CARCHEX only works with top tier warranty administrators and will give you all the information about them up front before you purchase.

"Mechanical Breakdown" warranties vs. "Wear & Tear" auto warranties
Classic wear and tear failures include: the gradual reduction in operating performance, burned/worn valves/guides, valve grinding, worn rings, burned pistons, any covered part that has not failed. This includes seepage of seals and gaskets, fasteners and retainers (nuts, bolts, screws, clamps, brackets), damage caused by overheating.

Is your auto warranty repair due to failure from a "mechanical breakdown" or is it "Wear & Tear"? You want warranty coverage for BOTH! Most auto warranty failures are wear and tear, so you can bet a cheapie "mechanical breakdown" warranty company will classify your warranty repair as wear and tear and reject your warranty claim right off the bat. Thank you for calling. Often the extended warranty sold by car dealers is a confusing mechanical breakdown insurance policy that can cost over $4000! This is not what you want. You want both "wear & tear" AND "mechanical breakdown" coverage in your warranty contract. Many items wear down, they don't break, so they are not covered by most mechanical breakdown warranties. People complain that car dealers lie to them and tell them "everything" is covered, giving a false sense of security. Some car dealer warranties require that you have them do all repairs. What if you can't get your car to the dealer? Before buying a vehicle service contract, carefully review what is covered and not covered to see whether wear and tear claims are excluded from coverage. If you don't get a wear and tear type of warranty, you'll get screwed I guarantee it. WarrantyDirect and warranties sold by CARCHEX combine wear & tear and mechanical breakdown, all in one extended warranty contract. You can have any ASE certified repair shop do the work. If you own a Nissan, BMW, Honda, Hyundai, Toyota, Chrysler, etc., you don't have to take it to your Nissan, BMW, Hyundai, Honda, Toyota or Chrysler dealer unless the repairs are still covered by the manufacturer.

Auto Warranty Buying Tips

Use your car rebate to pay for your auto extended warranty!
If you get a rebate on your new car, use your savings for a discount online extended auto warranty. It's like getting a free warranty. Many online car warranties are 40% cheaper than car dealers, have better wear and tear coverage and you'll still have money left over from your rebate. Tip: When you request your free auto extended warranty quotes online, be sure to enter your full email address so they can instantly email you the warranty price quote. (Example: MyEmail@aol.com). If you don't receive your quote in a few minutes, you probably did not enter your full email address properly, or used a bogus name that their quote filters rejected.

Deal with a solid extended warranty company
You want a car warranty administrator who can pay your claims. You deal with 2 companies when buying an extended warranty. One sells you the auto warranty contract, the other administers your claims. You want a well funded company that markets and administers their own auto warranty. WarrantyDirect, with over 26 years of proven track record, has been in business for nearly 20 years and also maintains high claim reserve accounts and reinsures policies through their A-rated insurer. CARCHEX works with multiple top tier warranty administrators and gives you multiple options so that you can choose the cost and coverage levels that work best for you.

Understand auto warranty coverage before you buy
People buy auto warranties without considering what they are buying. They buy extended warranties as an afterthought at the register in Best Buy, not knowing the coverage for their TV. Americans hear "extended warranty" and think they are protected by a golden umbrella covering all that goes wrong. Likewise, auto warranty customers fail to read their contract, fail to understand coverage, fail to adhere to proper vehicle maintenance schedules, then wonder why their auto warranty claim was rejected. Some consumers buy a used car, get an extended auto warranty, thinking the warranty company will recondition the whole car for them. They wrongly file complaints against their auto warranty company when repairs are denied, simply because their own mistaken definition of coverage differs from the auto warranty company's contract stuffed in a drawer somewhere. You are now smarter than that.

Typical Exclusions In Extended Warranties
No auto extended warranty covers glass, lenses, sealed beams, light bulbs, trim, moldings, bright metal, upholstery, paint, exhaust systems, tires, air bags, batteries, windshield wipers, brake pads, brake rotors, drums, shock absorbers, throttle bodies, etc. These are standard exclusions, don't let it bother you.

Before you buy an auto warranty, ask to see a sample contract, itemizing what is covered, and what is not covered
Your auto warranty company should fax or email you a contract to read. If they refuse, DO NOT BUY FROM THEM! If a part in question is not listed or implied by the "What Is Covered" list, than it is not covered, and check the "What Is Not Covered" list, but verify it with the car warranty company. The marketing sheet dealers show you is not a contract. If a slick sheet is all they show you, don't buy. You'll be surprised what's not covered thanks to contract weasel clauses not shown on marketing slick sheets.

WARNING! Some car manufacturer auto extended warranties DO NOT pay for car rental reimbursement during the standard warranty period! My GM Protection Plan was a prime example. If you have a 3 year warranty, any car rental expense you incur for the first three years may not be covered. This means even if the engine dies, and it's their fault, and you have no car for a week, you're out of luck!

The better extended auto warranties cover your auto rental.

Yes the car warranty companies we recommend pay your claims
Will they be there to cover your claim when you need them? We have first hand experience that any company we recommend covers your repairs, so you can sleep at night. My friend Mike's Jeep developed a cracked radiator and needed the freeze plug replaced. WarrantyDirect paid his $960 repair bill directly to the Chrysler dealer. The Chrysler dealer was impressed, living proof that they pay your claims. We advised both our friends when they bought their cars, as part of our focus study, we had Mike buy his Jeep warranty from WarrantyDirect instead of the Chrysler warranty. Dodge vehicles can be breakdown prone too so if you drive a Dodge, you might want to consider getting a Dodge warranty. One of our pastors got a Dodge Warranty for his 2006 Dodge Grand Caravan, and WarrantyDirect quoted him $500 less than the Dodge dealer for 7 years/70,000 mile of coverage.