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If you are interested in buying a car that has come off or will be coming off its factory warranty shortly you might want to consider an extended warranty or extended service protection. An extended warranty is a service contract between you and the vehicle warranty company. As with a standard warranty, an extended warranty in general will not cover regular vehicle wear and tear, but will cover mechanical breakdowns. If you decide to purchase a car from a dealer they will give you a quote on the extended warranty. Before purchasing the extended warranty from the dealer it is recommended that you shop around because the price you can expect to pay will be higher at the dealer than it will at an independent extended warranty company. Dealers will charge up to 100% more for an extended warranty compared to what you can expect to pay elsewhere for the same product. If you are in the market for an extended warranty there are a couple things to consider while you are shopping for one:
1. How reliable is the model of vehicle you are interested in buying? Although every vehicle is different, knowing the repair history and the cost of parts of similar vehicles can be very helpful if you are wondering whether an extended warranty is worth it.
2. Who is backing the extended warranty? The extended warranty might be backed by the vehicle’s manufacturer or an independent extended warranty (or aftermarket warranty) company. Extended warranties backed by the manufacturer will be more costly than those backed by aftermarket warranty companies. If you are considering an aftermarket warranty company, examine the financials of that company at Standard and Poor’s to determine how easily they will be able to pay claims. You can feel comfortable when purchasing an extended warranty from an aftermarket warranty company with an “A” rating or better from Standard and Poor’s .
3. How does the deductible work? You need to not only know the cost of the deductible, but also whether the deductible is applied on a per visit or per repair basis. If your extended warranty has a $200 per repair deductible and you take the vehicle in for repairs on three unrelated issues you will be paying $600 for the repairs, as opposed to $200 if the deductible was applied on a per visit basis.
4. Where can the repairs be performed? Having the flexibility of being able to have the vehicle repaired at multiple repair shops can be very beneficial if you travel a lot either for work or pleasure.
5. What exactly is covered? The majority of extended warranties will not cover breakdowns that result from parts being worn down over time, but there are some extended warranties that offer “wear and tear” coverage, that not only cover parts that break, but parts that need to be replaced as a result of standard wear and tear.
6. Is the vehicle still covered by the manufacturer’s warranty? If the vehicle is still covered by the original warranty then your rates for an extended warranty will be substantially lower. Obviously you will be paying for something you will not need to use until the vehicle’s original warranty expires, but the cost savings over time might be worth it.
7. What are some indicators of a bad extended warranty plan? Some warning signs that the extended warranty plan you are considering might not be worth it are as follows: the warranty is non-transferable to a new owner, repair costs are capped, there are a large number of exclusions, and the company’s customer satisfaction record is less than stellar.
There are multiple online options for extended warranties, but the three most reputable are Carchex, SmartAutoWarranty (a Carchex Company), and WarrantyDirect. Carchex presents offerings from multiple warranty administrators. In essence, they created a marketplace where the highest rated extended service providers compete for your business. They also give you the choice of having your repairs done at more than 30,000 facilities. Carchex has a rating of A+ from the Better Business Bureau, and is endorsed by Pat Goss of “Goss Garage” and “Motorweek”. They pride themselves on the fact that they do not use strong arm sales tactics, and the application process is very clear and works seamlessly. SmartAutoWarranty has much the same offerings; 30,000 repair facilities available, prices at less than 50% of what you would expect to pay for an extended warranty from a dealer, and the claim specialists help you through the repair process.