Do Extended Warranties Give You Peace On Earth?
Extended warranties apply to automobiles as well as other consumer products. They are normally not worth their cost. In fact, these “Extended Warranties” are not warranties at all. They are more properly called service contracts. These agreements are usually sold by car dealers for $1,000 to $3,000 with a new vehicle. Through a service contract, you pay an independent warranty company, an administrator, up front to pay for repairs for covered problems with your car in the future.
A car dealer will try and pressure you into paying for a service contract by suggesting that repairs will come up after the warranty expires and you’ll save money by buying this contract. A service contracts are usually a huge source of income for the car dealer. Typically 50 percent of the money goes straight into their pockets. The reason for this is that the coverage is usually not at all what you expect.
Usually these contracts don’t cover the following:
Lack of Maintenance Records? Failure to retain and produce records that the vehicle was maintained in accordance with the manufacturer’s routine maintenance schedule. It is generally not enough to just maintain your vehicle. You must also be able to provide proof to the service contract administrator that the vehicle was maintained. No proof equals no coverage.
Wear and Tear? Normal wear items such as brake pads and shoes, gaskets, hoses, clutches, shock absorbers, and belts are typically excluded. These are the items that are expected to “wear out” through normal use of the vehicle and are the owner’s responsibility. These items are the ones most likely to require repair during the first six years of your car’s life.
Failure of a Non-Covered Part? Repairs which are needed to cover a part caused by the failure of a non-covered part are excluded from coverage. This means that if a wear item such as a hose or gasket fails and this causes a major engine failure, the engine repair will not be covered.
“Investigative surgery” like you leave your contract is not going to cover “exploratory surgery” on your car to find out the problem is, unless the problem turns out to be covered. This sometimes means you’re going to pay part of the repair costs upfront before the garage even starts to investigate the problem.
Repair option restrictions. You may have a very difficult time getting your vehicle repaired due to restrictions in the contract as to where you can get the work done. Sometimes the contracts are very specific about who can do the work. On the other hand, some service contracts have gained a reputation of not paying so the service center won’t even honor the contract itself. In that case, they’ll ask you for the money upfront and leave you to try and get reimbursed from the contract company.
With all of the above hurdles, it is hard to imagine receiving any peace of mind if you actually need to use your service contract. Additionally, with the quality of today’s vehicles the odds of needing a major repair during the first six years of your car’s life are slim. The bottom line is to save your money. In most situations you will be farther ahead monetarily and have greater peace of mind by saving your money for a rainy day.
