News

by: Mike Najjar

What are extended warranties?
 

If you buy a new or used vehicle today, chances are good that the dealership will offer to sell you an "extended warranty" for after the factory warranty runs out. They use the term "extended warranty" but what you're really buying is an insurance policy for vehicle breakdowns. We at Master Auto Repair have lots of experience dealing with extended warranties because most of the good warranties do not require you to return to the dealership for warranty service.

The prices for extended warranties can range anywhere from $500 up to $1,700. The amount you pay depends on your car's mileage at the time of purchase, and on the type of coverage you select.

Questions you should ask before buying an extended warranty:
 

What repairs are covered under the warranty?
 

Some warranties only cover major engine and transmission breakdowns. These naturally will cost less than a "bumper to bumper" warranty, which covers most vehicle components. Most of the policies do not cover normal wear items, such as brake pads, hoses, belts, filters, spark plugs, or any fluid replacement. Gaskets are an item that may not be covered. Cylinder head gasket replacement is usually a major expense, ranging in cost from $700 to $1,500. What if you paid for a warranty that did not cover cylinder head gasket replacement? You should see a list of all covered components before buying.

Ask if diagnostic charges are covered. With today's automobiles, most engine performance problems require quite a bit of diagnostic time. Sometimes the diagnostic testing costs more than the actual cost of the parts and labor.

Is there a deductible? How much is it? How is it applied?
 

You can buy warranty policies with zero deductible, up to $100 deductible. Ask if the deductible is applied once each visit, or once to each type of repair. You can save a lot of money if the deductible is applied once each visit to the repair shop. For example, if your car needs transmission repairs and brake work, some policies require you pay $100 deductible for the transmission repair, and another $100 for the brake repairs—even if they're done at the same shop visit. When you add diagnostic fees and the cost of fluids, you could spend almost $300 out of your pocket for a "warranty" repair.

What about towing charges? And car rental charges?
 

If towing and car rental are included, is there a deductible? Are there any limitations on the car rental? There may be a minimum number of days your car is in the garage before rental coverage applies. There may also be a maximum rental reimbursement.

Can you choose your own repair shop for warranty repairs?
 

Some policies require you to return your vehicle to the selling dealership. Others only specify that you take your car to any ASE-certified technician.

Does your regular shop honor extended warranties?

Many independent shops do not honor extended warranties at all. Other shops will repair your vehicle and collect money from you. In this case, it would be up to you to obtain reimbursement from the Warranty Company. Be aware that some warranty companies require that all repairs be authorized in advanced to qualify for reimbursement. You should choose a repair shop that's familiar with the "ins and outs" of the various warranties.

Can the warranty policy be transferred if you sell your vehicle? If so, how much is the transfer fee?

If the Warranty Company lets you choose the repair shop, does it pay the standard labor rates for your area?
 

Most warranty companies pay the "going rate" for auto repairs. This makes it easier for you to find a repair shop willing to do the work.

There are a few warranty companies who only pay "an industry standard" labor rate. What this means is that the warranty company has set a below-market price for the labor charges they will pay. In these cases, your regular shop may not be able to afford to repair your car.

Should you buy an extended warranty when you buy a vehicle?
 

Factors to consider before you buy a warranty:
 

Does the car come with any kind of free warranty?

How long is the free warranty and what does it cover?

How long do you plan on owning the vehicle? Why buy a five-year warranty if you may not have the vehicle that long?

What if you put the cost of the warranty policy, say $1,500, in the bank in an emergency savings account? Then you could withdraw the money as needed to pay for your vehicle repairs.

Another alternative is to not buy the warranty, but put $100 a month into a savings account for emergency car repairs.

Making the final decision—buy or don't buy?
 

Only you can make the final decision whether to purchase an extended warranty or not. We have tried to give you enough information here to enable you to make an informed, intelligent decision. Buying a new or used car can be a very trying experience. Don't let an aggressive sales or finance person pressure you into making a decision that's not right for you.

If you have any questions about extended warranties, or want us to review a warranty plan before you buy, we would be happy to help you.