Understanding Extended Warranties

In life there are situations that start out great, but sometimes end in an unfortunate, premature way. This does not have to be the case when it comes to the relationship between you and your car. There is a solution, and it’s called an extended warranty, and it can help keep your car a prized possession rather than a cumbersome money pit. In essence an extended warranty is an insurance policy for your vehicle that covers vehicle repairs, instead of collision or accident damage. An extended warranty can safeguard against expensive, unforeseen repairs. Extended warranties are really service contracts, since they cost extra and are sold separately. With all extended warranties it is important that you maintain your vehicle per the manufacturers recommended service intervals. In all the years I have been in the automotive business the only time I have seen extended warranty companies deny coverage it is because the vehicle was not maintained properly, abused, or modified in someway that was detrimental to the vehicle (such as raised or lowered suspension).

An extended warranty may purchased at the time you buy your vehicle or much further along in your ownership experience, but realize if you purchase after the vehicle is out of the manufacturers warranty the cost can be significantly higher.

If you are the type of person that likes to prepared for all eventualities, bearing in mind the ever increasing cost of vehicle repairs, then a service contract can make a lot of sense.

There are a few things to keep in mind when purchasing an extended warranty, such as:

Average repair costs for vehicle repairs
Average repair costs for vehicle repairs

What is the reliability record of the vehicle you are buying? Take a look at the reliability history for the vehicle you are considering purchasing. Unfortunately MINI and BMW, according to Consumer Reports are not the most reliable vehicles on the road, so a service contract is highly recommended. As an example the cost of replacement for a new transmission on a MINI or BMW can range between $6000-$8000, so you can see how a service contract can be beneficial to you.

Ask who is behind the warranty that you are considering? According to Consumer Reports the top 5 warranty companies are: Endurance, Carchex, Warranty Direct, Easy Care, and AA Auto Protection If possible stick with one of these companies. From our experience we have found found that Fidelity and MaxCare are also good companies to purchase an extended warranty from.

Can repairs be performed at any repair shop? Some extended warranties stipulate that repairs must be performed at the dealership where the warranty was purchased, this can prove limiting and inconvenient. We recommend purchasing an extended warranty that allows repairs at any certified automotive repair facility. You will definitely appreciate this if your vehicle breaks down or needs repairs while you are on a road trip.

Is the warranty transferable? Some service contracts end when the person who bought the warranty sells the car. A contract that allows you to transfer the warranty to a new buyer is preferable, and it’s a great selling point.

What exactly is covered? Know what is covered, and more importantly what’s not covered.

Is a cash layout required for repairs? Some warranty companies  require that you pay the bill, send in the invoice or receipt and wait for reimbursement. It can take weeks, even months to get reimbursed by the warranty company. You will want a warranty company that pays the dealership or repair facility directly with a credit card.

Remember to compare all of your options before making a decision. Utilize the internet, many companies sell directly online, cutting out the middle man (i.e. the dealership). Shop around, once you have decided on the which brand of vehicle you want to purchase get some quotes from other dealers, it will at least give you an idea of what an extended warranty, with the coverage you want should cost. If you are a member of a credit union, check with them as most offer inexpensive extended warranties that can be purchased directly from them.

In warranty buying, as in many other aspects of life, it helps to educate yourself.

Feel free to contact us at The Haus in Los Angeles, California if you have any questions about the warranty you are considering purchasing, we would be happy to give you our opinion.

  • reply Stewart Boomer ,

    I’m looking at buying a Mini, but I haven’t been sure whether or not to get the extended warranty, so this article was a lifesaver. I think the next thing that I need to do is go and figure out what exactly is covered before I make a final decision about anything. Thanks for sharing!

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