#extended car warranty
The majority of buyers never use the coverage
Looking for an easy way to save hundreds on your next new car and simplify the buying process at the same time? Skip the extended warranty. The dealer will probably try hard to sell you one, telling horror stories about the thousands of dollars it can cost to replace an engine or transmission. But the odds are you’ll never need the coverage, and even if you do, the money you’ll save in repairs won’t come close to what you paid for the added warranty.
A recent Consumer Reports survey found that 55 percent of owners who purchased an extended warranty hadn’t used it for repairs during the lifetime of the policy, even though the median price paid for the coverage was just over $1,200. And, on average, those who did use it spent hundreds more for the coverage than they saved in repair costs.
Beware of extended-warranty scams
Even if you’re considering an extended warranty, be wary of any solicitation you get through the mail or over the phone. Scammers have found that the warranty business can be very lucrative, and the Better Business Bureau has received thousands of complaints from consumers who have been stung. Typically, the questionable outfits contact an unsuspecting owner whose warranty has just expired or is about to expire.
The impression they want to give people is that they are contacting them on behalf of their dealer or manufacturer, or they are associated with them, which, in fact, they are not,” says Michelle Corey, president and CEO of the St. Louis office of the BBB.
Once they’ve taken the bait, the unfortunate victims often find that their problems have just begun. “They’re not able to read the contract until it’s mailed to them,” says Corey. “They don’t see the conditions, the limitations, or exclusions. Then when they try to use it, they’re informed that pre-existing conditions don’t apply, or they’re told they don’thave maintenance records showing that they followed the manufacturer’s requirements for upkeep.”
The final insult comes when unhappy customers try to get a refund, and they are either refused or only given a prorated amount based on when they signed the contract.
The first step to take to defend yourself against this type of fraud is to contact your dealer to ask whether whoever is trying to sell you coverage is associated either with them or the carmaker. Also ask whether your original warranty really has expired to avoid paying for redundant, overlapping coverage.
Moreover, don’t give your credit-card number or commit to anything over the phone or through the mail without seeing a contract and reviewing what is covered first. And be sure to keep maintenance records and receipts for future reference. Beyond warranty concerns, it may help in selling your car down the road.
If you decide to buy a coverage plan
Peace of mind comes at a price. If you opt for an extended warranty, consider these smart-buying tips.
Don’t buy under pressure. Dealers often try to sell the convenience of rolling coverage into a new-car loan, but that means you may be paying up front for coverage that you already have with the factory warranty. You can purchase an extended warranty after buying the car, although you may find the cost increases as the vehicle ages.
Don’t be afraid to bargain. Among those who purchased an extended warranty, only a third of our survey respondents tried to negotiate a better price for their contract. Most of those who did haggle were successful, saving about $325 on average.
Shop around. You don’t have to buy an extended warranty through a dealership. In fact, you may find a better deal through your auto club or insurance company. But consider this: Satisfaction in our survey was highest among those who bought an automaker-backed warranty.
Go all in. Our survey found little difference in cost between limited and bumper-to-bumper coverage, which is more likely than powertrain plans to include reimbursement for towing, travel expenses, and a rental car. If you’re going to buy, get the full protection.
Read the small print. Before signing, be sure you understand what is covered and where you can take your car for authorized service. Third-party warranties, especially, may have notable restrictions on approved shops. Given how many dealerships have closed in recent years, the availability of participating repair shops is a particular concern.
Consider an extended warranty for the long haul. All cars tend to become less reliable over time, so an extended warranty might be worth considering if you’re planning to keep your vehicle long after the factory warranty runs out.