Do I really need an Extended Warranty?
Who is really behind the warranty that you're considering?
Is the contact underwritten by an insurance company?
What is the nature of the deductible?
Can repairs be performed at any repair shop?
There are many reasons to purchase an extended warranty. Your vehicle is one of your biggest investments. An extended warranty will insure it is always in the best mechanical condition. With the complexity of today's vehicles, one major repair often costs more than the extended warranty. Hourly labor rates can top $90 per hour in some markets.
Many warranties are transferable and will increase the resale value to potential buyers. Who wouldn't want to own a vehicle that comes protected from repair bills.
An extended warranty may be backed by a third-party warranty company or by the vehicle's manufacturer. Knowing who will be administering your policy can give you insight into the strengths and weaknesses of the contract you're considering. Administrators act as claims adjusters, authorizing the payment of claims to the service repair facility under the contract. Manufacturer-backed warranties score very highly when it comes to ease of use. However, third-party warranties are often less expensive and offer broader coverage. If you decide to purchase a third-party warranty, make sure they have the financial resources to meet their obligations under your contract. After all, the ultimate measure of a warranty company is ensuring that your claims are paid quickly and easily.
Some states require a service contract to be underwritten by an insurance company. Find out if the primary insurer of the contract has been rated by A.M. Best, the most respected company offering ratings on insurance companies (www.ambest.com). This will give you an indication as to its ability to pay your claim should the administrator go out of business.
Fully investigate a policy's deductible before signing on the dotted line. Consider not only its amount, but also whether it's per visit or per repair. With a per visit deductible, each visit to the shop will run you a fixed amount, regardless of how many parts are repaired; a per repair deductible applies to each serviced part. What sounds like a minor difference could have a major impact on your wallet.
Some warranties end when the person who bought the warranty sells the car. A warranty that allows you to transfer it to a new buyer is preferable; it's also an excellent selling point for prospective buyers when you decide to sell your car.
Some warranties require that repairs be performed at the dealership from which the warranty was purchased; this can be limiting and inconvenient. You want to look for a warranty that gives you more than one service facility to choose from. You'll appreciate this if the vehicle ever need service while you're on a road trip, miles away from home.
Know what's covered -- and what's not covered -- by the warranty you're considering. Does the contract cover breakdown as well as wear and tear? Under a "breakdown" warranty, coverage is extended only to parts that break. Not all parts fail due to breakage; some need to be replaced because they've worn down over a period of time. A "wear-and-tear" warranty extends coverage to worn-down parts in need of replacement.
Additionally, some "entry level" contracts don't cover ABS brakes and many of the luxury options common in today's vehicles, so if your vehicle has this feature, you should consider upgrading to a higher level of coverage. And overheating -- regardless of its cause -- isn't covered in many warranties. Thus, if overheating occurred due to problems with an expensive part such as your radiator, you'd be stuck with a hefty repair bill.
Some warranties require that you pay the bill, then send the receipt in and wait for reimbursement; in many cases, months elapse before you get your money back. Ideally, you'll want a warranty that pays the service repair facility directly with a credit card immediately upon completion of the repairs.
Some warranties have terms that start from the original in-service date (the original purchase date) of your car. This is a sales tactic that companies use to make the contracts appear to have a longer coverage term. If you purchase a warranty that begins the day you buy it, the date of expiration will be clearly defined.
In addition, you should check the contract to see if there is a waiting period before you can use your extended warranty. Some companies have waiting periods as long as 30-60 days.
Source: Warranty Direct