The average new car costs over $25,600. With that cost, owner expect trouble free operation and longer vehicle life. So why are many turning to extended warranty plans? The answer is simple:they want to protect their investment. Here are a few simple tips you should keep in mind when considering an extended warranty.
1. Decide Whether You Really Need It
Most Manufactuers offer at least 3-year/36,00 mile bumper-to-bumper protection on their new products. In addition, many offer extended warranty coverage on engine and powertrain components and limited warranties on certified used cars. In most cases, these plans offer consumers excellent protection. However, if you drive more than 12,000 miles per year or plan to keep your vehicle for a long time, then an extended service plan might offer the kind of security you are looking for.
Keep in mind it is less expensive to purchase the plan while the vehicle is still covered by the manufactuer's warranty.
2. Choose a Provider
There are three basic organizations that offer extended warranties; automobile manufacturers, new and used car dealerships, and independent companies or third parties. As usual, it is up to the consumer to decide which is best for their circumstances, but here are a few of the pros and cons of each:
Manufacturer
- Pros: Factory-backed dealer repair network nationwide. No haggling about repair,price, or components.
- Cons: Highest upfrnt costs, and dealer network might be limited in your area.
- Pros: Lower up-front cost:but plan and service car at same place.
- Cons:Usually only one service point. If they can't fix it, who do you call?
- Pros: Lowest cost (usually between 30-50 percent less than manufacturer plan), most coverage choices, dealers, or local repair shops. Third-party warranty programs are usually their only business.
- Cons: shop coverage might not be as promised. Some are 'here today, gone tomorrow" companies.
- Corporate credit card to pay for services
- ability to choose dealership or independent repair shop
- Warranty is transferable
- Trip-interruption coverage
- Free loaner car
- BBB certified
- Out of pocket to cover repairs
- Specific caps on repair costs
- Large number of exclusions
- Dealership pressure to purchase plan
- Non-transferable
- Company lacking strong track record of customer satisfaction
