Independent companies, dealerships and car manufacturers are offering
consumers a vast and tempting
array of plans through the Internet or at the lot (or, if you insist, in
the mail). And consumers are plunking
down as much as $1,000 for a 100,000 mile extended guarantee.
All of which begs the question, is an extended warranty necessary? If
you have a standard warranty,
even for a measly three years, do you need an extended warranty for, say,
five more? It depends,
of course, on how long you plan to keep the car. For people who trade
theirs in like clockwork,
consumer advocates say an extension is probably not necessary. Are they
a good deal? Warranties,
by nature, are moneymaking tools for those who offer them. But the business
of providing extended
warranties for cars is becoming more challenging, because it is difficult
because warrantie writers are
dependent on manufacturers and what they've done. They don't know what effect
changes will have on
the car, and cars are becoming more complicated. It's hard to keep up.
For people who hang on to their autos through thick and thin, and for
people who would rather pay now
for some peace of mind later, extensions can be appealing. But if you
decide to buy one, you should be
aware that all warranties are not alike. Consumer experts recommend doing
a considerable amount of
homework to avoid getting rooked in both small and major ways. It's a contract
with a lot of rules, make
sure you understand them. Look at what it is you're buying, the benefits
and what it covers.
FINDING FACTS
The Internet has plenty of information on extended warranties, but you
have to consider the source and
point of view of individual sites. Some may not declare their indirect
allegiance to dealerships and the auto industry,
so you have to be aware of such connections. Edmunds.com is a car advisory
service with straightforward material,
but it has an alliance with General Motors, which pays for ads to pop up
on the
site and for prominent links to its own site. At Edmunds.com, the fact
that extended warranties can be flawed never comes up.
Other sites, however, are vituperative about the auto industry and need to
be regarded with wariness, too.
UNDERSTAND THE PRODUCT
Many extended warranties include roadside assistance, a vital service
if your car insurance falls short on
that convenience. Beyond that, there are three basic types of extended
warranties: one covering mechanical breakdown
(a decision that can end up being subjective, given the dealer) involving
the drivetrain, that is, engine, transmission, axles
and the like; one covering wear and tear, covering parts that disintegrate
over
time, like piston rings, wiper blades, tires, brakes (another judgment
that can be skewed by the dealer);
and a third called bumper to bumper, comprehensive contracts that are
often called
"exclusionary warranties."
These premium contracts cover nearly every part of the car except items
noted on the "exclusion list,"
making it ultraclear what is not in the plan.
Most warranties that dealers sell are for mechanical breakdown, so you
usually have to ask for a
wear-and- tear contract. The Web is a good place to shop for the latter
because car dealers prefer to sell mechanical
breakdown and bumper-to-bumper contracts, which usually have a higher markup
value.
Wear-and-tear contracts are usually cheaper plans to buy, therefore less
profitable for dealerships.
LOOK FOR A SOLID COMPANY
As for extended warranties themselves, it is vital for consumers to
sign a contract with a "solid" extension warranty
company that can pay for the claims and will be in business during the life
of the contract.
To ensure this, the consumer should determine whether the warranty company
is reinsured, and preferably choose a
company that is publicly owned and has received at least an A rating from
Standard & Poor's or from A. M. Best.
(California, for one, requires extended warranties to be underwritten by
insurance companies.)
MAKING THE DEAL
The good news is that you can usually haggle, just as in any other transaction
with a car dealership.
The bad news is that you can encounter the same kind of trickery that
goes on in transactions with car dealerships.
The most common complaint is that car dealers say you have to buy a warranty
the bank
requires, otherwise you won't get the loan. Who are the prey? People with
bad credit, low on esteem,
tend to believe these things.
Sales-pitch tactics for extended warranties have been known to subvert
even the smartest consumer's
efforts to protect himself. Stephen Vivien, who lives in Northern California,
had thoroughly researched
the art of negotiating to buy a car — in his case, a new Volvo. But he
wasn't prepared when the
saleswoman offered him a lower financing rate for his car loan in exchange
for the purchase of an
extended warranty.
By that time I was fairly convinced the loan rate would have gone back
had I put my `no warranty' foot
down, he said in an e-mail message.
READ IT CAREFULLY
In most states, there's a provision that consumers have a period of
time even after they have purchased
the contract to look it over to make sure it's what they want, otherwise
they can return it and be entitled
to a refund.
Most consumer-advocate Web sites emphasize that you should see the contract,
not some version of it.
Dealerships show you the slipsheet but not the contract, it takes 10 minutes
to read and focus on what
is not covered.
New Yorkers, at least, have very specific guidelines backing them in
buying warranties.
The New Car Buying Tips at the Web site of the New York State attorney
general remind residents
that a dealership must provide a copy of the service contract, and that
if consumers are uncomfortable
with it after they get home, they are entitled to a full refund, less
any claims paid, within 20 days of the
mailing of the contract or within 10 days if it is delivered at the time
of the sale.
FOLLOW THE RULES
Once you have a warranty, you should study the procedures for filing
claims before an emergency arises.
The biggest problem is that most contracts require repairs to be authorized,
resulting in Kafkaesque binds.
People don't seem to understand that when they try to process a claim, they
may end up dealing with claims
officers at insurance companies, and they take the rules very seriously.
Ultimately, your car will experience physical breakdowns, and only your
inner consumer can tell you
whether to buy a warranty or not. It all goes back to the length of time
you plan to own the car versus
the time the standard warranty covers.