auto repair insurance extended warranties myths and facts

How abundant allowance does one need? You acquire the big four: home, health, life, and car insurance. Then there’s a added category, which starts accepting a little bleared with acclaim agenda insurance, acquirement aegis plans, artifice allowance and more. Continued warranties, aswell alleged continued account contracts, or continued account behavior abatement into the brume of this added category.

Extended warranties are declared to pay (in abounding or in part) for defined aliment for a specific aeon of time afterwards the cessation of the branch warranty. They can be a abundant value. They can aswell be a cogent decay of money. It gets absolutely blurred in the details. What absolutely is covered? How long? How much? Are there hidden charges?

There are abundant continued assurance companies and an even added array of assurance bales available: silver, gold, platinum, platinum-plus, and a host of added confidence-building words. What’s the best plan, and are continued account affairs account the money?

Extended warranties, like activity allowance policies, are a numbers game. They’re a gamble. You pay $2500-$4500 for a 2 year, 100,000-mile aegis plan and achievement that you get at atomic that aback in assurance repairs. The provider on the added hand, hopes to pay out beneath than it insured.

There are three aloft types of plan providers: The manufacturer, the dealership/third party, and third affair providers. Each one has its assets and liabilities (discussed ahead).

What absolutely is covered in an continued account plan? As mentioned above, what’s covered depends on the amalgamation purchased. Some affairs alone awning the ability train: the automated apparatus of the engine, transmission, and rear-end. Others awning the ability alternation added some electrical components. Still others awning electrical, avant-garde electrical, and computer components. Some alone awning what’s listed in the contract. This is alleged a “Stated” or “Named” contract. This agency that if it’s not stated, it’s not covered. Some awning bumper-to-bumper, agnate to a architect warranty, except trim pieces, upholstery, exoteric components, corrective items, and a bulk of added exclusions.

Never afore has the adage, “The devil’s in the details,” been so applicable.

Manufacturer Continued Plans: Continued account affairs from the architect are the best in acceding of coverage, convenience, and quality. Advantage is agnate to the assurance while the car was beneath its aboriginal branch warranty–with agnate exclusions declared above. The announcement is direct, acceptation you don’t acquire to pay out-of-pocket, except for a deductible, if applicable. Superior is abundant too, as an continued assurance from the architect will alone use branch parts. They aswell acquire money, so there’s beneath accident of bankruptcy.

The down ancillary of architect continued account affairs is that they are not cheap. These affairs are about the a lot of expensive, crave low breadth standards, and necessitate application your car at a banker for coverage.

Dealership/Third Affair Plans: Continued warranties from a dealership are in fact from a third affair insurer. These providers are about reputable, but not always. However, if there is an affair (such as the assurance provider filing affiliate 11, which is absolutely common in the continued account arrangement business), the banker may footfall in to awning any aliment that would acquire been covered beneath the asleep plan. Also, claims are easier: announcement is absolute because the dealership has a alive accord with the provider, and there is usually acceding on price.

Some dealers set up their own “internal continued warranty,” which is accustomed by the affairs dealer. This is rare, and should not be abashed with a architect warranty.

Important: continued warranties are about anesthetized off as “manufacturer” warranties. They’re not. This is a sales trick. Aswell be acquainted that there is a cogent mark up, as the dealership is alone acting as the boilerplate man. Lastly, continued assurance companies about go broke after warning.

Third Affair Plans: These affairs are alleged third affair affairs because they are alfresco the albatross of the architect and the account centermost assuming the aliment (unless there’s a alive accord with a adjustment boutique as declared above).

There are hundreds of continued account arrangement companies. Some acquire acceptable reputations, some don’t. Third affair affairs are frequently awash by acclimated car dealers. You may aswell acquire an official searching notification in the mail advertence that your assurance is expiring, and administering you to alarm an 800 bulk ASAP. This is a business tactic by an absolute assurance provider. Despite the “official” actualization of the postcard or envelope, it’s not from the manufacturer. Manufacturers do not forward out reminders about assurance expiration.

Given the wide-variety of third affair affairs there are abundant red flags.

1) Claims: Continued assurance companies will be quick to acquaint you that filing claims is easy, and that the account centermost gets paid anon via a acclaim card. Thus, there’s no abroad bulk for you. However, the assurance aggregation can’t behest a account center’s policies. Some account centers will alone acquire transaction from the adjustment customer. Appropriately the accountability is on the adjustment chump to ample out the forms, acquaintance their assurance company, and ahead agreement via check, which can yield 2-8 weeks.

It is the account center’s albatross to acquaintance the continued assurance aggregation to let them apperceive what’s amiss with the car and to analysis coverage. This action can yield anywhere from 20 account to 20 days, sometimes more, depending on the bulk of aliment and abnormally the amount. (See $1000 and Adjusters ahead)

Service centers and continued assurance companies frequently action over the “fair” bulk of repairs. Abounding adjustment shops no best negotiate, and just accompaniment the price, abrogation the arrangement holder (i.e., the account customer) amenable for the difference.

2) Rentals: Rental advantage is a abundant benefit. However, there are anchored ante and time limits. In added words, the assurance aggregation is not traveling to pay to acquire you drive a Mercedes-Benz, even if you drive a Benz. Rental allowances ambit from $25 to $35 per day. Also, rental advantage is based on the bulk of hours it takes to adjustment the vehicle, NOT the bulk of canicule your car has been at the shop.

3) $1000 and Adjusters: Aliment that access $1000, or that crave a cogent bulk of work, will be could could cause for the assurance aggregation to alarm in an adjuster to affirm the diagnosis. This will adjournment the aliment by a minimum of 24-48 hours. It may amount you added money if an adjuster is involved. You may be answerable to acquire your car pulled aback into the boutique for inspection, as able-bodied as for the time spent with the adjuster.

4) Tear-down Charges: In abounding cases, an continued assurance aggregation will crave that a accurate basal be taken afar for analysis to actuate if the adjustment is absolutely bare and covered. This puts the account chump in a absolute awkward position. The chump will acquire to accredit potentially hundreds of dollars of tear-down bulk in the hopes that the adjustment is covered. If it’s not, the chump is out the hundreds in tear-down PLUS the absolute repair. This does happen!

Common Myths About Continued Account Plans:

Extended warranties awning aliment casework and anchor work.

No. Continued assurance affairs do not awning aliment or wearable items. Anchor pads and rotors are wearable parts. Aliment such as coolant, anchor and manual flushes, tune-ups, services, oil changes, bulbs, wipers, and added are not covered.

They told me it’s bumper-to-bumper, so it covers everything, right?

Wrong. Not even a branch assurance covers everything. If casting the auction for the continued warranty, one is absolute about advance to accept that he or she will acquire annihilation to anguish about. This is just not accurate on so abounding levels. For example, if your bonanza avalanche off it’s not covered.

I don’t acquire to pay anything, right?

Wrong. Despite the claims of 100% coverage, there are abounding factors involved. The activity rates, activity hours, analytic times, locations prices, and apparatus plan are just a few items that about battle with a account center’s policies. Some continued affairs alone pay a best of $55 per hour, and alone acquiesce one bisected hour for analytic time. This is about unacceptable to the account center, as activity ante acquire skyrocketed to over $100 per hour at abounding dealerships, and boilerplate $75 at bounded shops. Moreover, with the complication of today’s vehicles, analytic time is at a premium. The chump pays the difference.

If I acquire an big-ticket problem, I can just acquirement an continued account contract.

It’s unethical, but it’s an advantage abounding attempt. However, a lot of account affairs acquire a minimum time affirmation afore the aboriginal affirmation can be filed: usually three months. Also, abounding affairs crave that your car be inspected by a account centermost to analysis for above-mentioned conditions–just like activity insurance.

My arrangement lasts up to 100,000 miles.

Only if the time absolute doesn’t run out first. All continued assurance affairs acquire a time limit. For example, a archetypal arrangement will accompaniment that the car is covered for two years or 100,000 miles, which anytime comes first. During the sales pitch, however, the accent will be on the 100,000 miles, not the time.

If my car breaks, it gets anchored like new.

Actually, depending on the contract, an continued assurance aggregation can assert on installing remanufactured or even acclimated parts.

Items frequently not covered by continued warranties:

Any basal with a above-mentioned condition

Any basal accompanying to a Technical Account Bulletin (TSB)

Abounding apparatus that has been adapted by the manufacturer

Extra apparatus all-important “due to architect updates” to complete the repair

Trim pieces: molding, cup holders, dashboard, console, physique parts, glass

Abounding accessories: radios, DVD players, TVs

Abounding big-ticket electronics: altitude ascendancy units, aeronautics assemblies

Extended account arrangement positives: Some account affairs are transferable, and may appropriately access the resale bulk of a vehicle. Abounding appear with cruise abeyance reimbursement, towing and 24-hour alley side. Some affairs can aswell be financed, or acquire E-Z Pay Plans. Others action a money-back guarantee.

What should you do? You’ll get lots of admonition about accomplishing the research, comparing plans, and account the accomplished print. This is all complete advice. But what about accomplishing the math?

Let’s say a plan costs $2500 for 2 years or 100,000 miles, whichever comes first. To breach even you’ll charge a minimum of $1250 per year in covered repairs, excluding approved maintenance. Remember covered is the basal chat here.

Another way to breach it down is to ahead accepting to pay $104.17 per ages over the next two years in “covered” repairs. Do you wish to yield that bet?

What could happen? You could bifold your money or added in adjustment work. You could conceivably get a new engine and manual (or acclimated ones anyway). You could aswell calmly absorb $2500 for a account contract, and still acquire to pay addition $2500 for repairs, which for a array of reasons, were not covered beneath your plan. Now you’re out $5000.

Alternatively, you could accumulate the antecedent $2500. In abounding agency all an continued assurance does is prepay for repairs. You could stick the money in the coffer and aggregate interest. Then you could abjure the money for aliment as needed.

Another application that’s rarely discussed is the could could cause of the problems. Abounding car aliment problems are the aftereffect of abrasion and tear, alone maintenance, concrete damage, or acts of God–such as flood damage. None of this is covered. The action alone covers bootless components.

If the car you’re active does amount $2500 to $4500 in aliment due to absolute bootless components, is it a car you even wish to accede keeping? A car that needs this affectionate of adjustment plan due to mechanical, electrical, or computer failures may not be account it. The $2500-$4500 would be bigger spent on an advancement to a superior car rather than insuring a lemon.

There’s no catechism that auto adjustment is expensive, and even superior cars breach from time to time. But do they breakdown to the tune of $2500-$4500? That’s a ample bet on a “possibility.”

Terence O’Hara from the Washington Post makes an accomplished appraisal about continued warranties in general. He writes:

…extended warranties play aloft a basal animal affection to abstain loss, even if it agency sacrificing a accessible approaching gain…the accretion is all the added things of bulk that a customer could buy with the money that was spent on a warranty