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Dear concerned car owner,
Extended warranty contracts usually
don't pay for themselves. In my experience I have found that most of
the contracts that I had to make a claim on paid very little-if
any-of the repair cost. Most of the contracts will list
excluded items, and
unfortunately those items are usually what will fail. The parts
that are covered by the contract are not parts that have the problems. I find a
lot of the contracts list a lot of covered parts, but most of the parts on the
list are not applicable for the cars on the road today.
The other day a customer showed me the
extended warranty contract that she was considering and I could only find
four items that pertained to her car that would be
covered. She would still have to pay a deductible for each claim, and the
policy proved to not be a good deal for her. Take a copy of the policy to your
mechanic and get their opinion. The mechanic is the one that will be talking to
the claims department anyway, so you might as well find out if your mechanic
would want to do business with the warranty company before you
buy.
I personally do not like to talk to the
warranty company on the phone. They ask me questions that I am sometimes
not in a position to answer, like "what was the cause of the brake master
cylinder failure." If I knew that I could design one that would not fail in the
first place. They usually want me to negotiate my prices to "fit" their pay
policy, and tell me what parts they will pay for and what parts
are not covered.
The overall feeling that I get when I do
business with most of these extended policies is not a very pleasant one for
me. I will accept them from my
loyal and regular customers, but if you are a first time
customer and want me to make a claim for you, I might pass on the
job. Read the list of covered parts, if you do not know, or have not
heard of, most of the names listed, then it is probably a bunch of hype to make
the contract sound highly technical and impressive to the layman.
The list sounds great and fills the
page, but there is no real protection for the consumer. If a
covered part does fail, the shop has to call the claim office and talk to a
representative and give an estimate. This sounds easy, but it can become
a bartering game between the shop and the claims officer
about what the parts cost, or the shop's labor rate, or any other part that
was damaged by the failure of the covered part.
This can take some time to process and
get the claim approved and will not be very rewarding for the shop, and
eventually for the customer. There will be a deductible to pay by the customer,
and on some large claims the warranty company might send out an independent
appraiser for on-site inspection before giving the authorization to repair.
I have seen the warranty company pay for a
broken water pump but not pay for the broken timing belt that was caused by the
faulty water pump in the first place. In this scenario the warranty company
paid $120.00 and the customer paid $290.00 to cover the cost of the timing
belt.
Remember, you are dealing with an
insurance company and they hate to
pay claims! I think it is better to put the money that you would
have spent on the contract in a "car repair" mutual fund account and
hope you don't have to dip into it very often. If you are buying a Jaguar or
BMW or something along those lines, then I might consider buying the extended
warranty, but if you are buying a Honda Accord, then I think you will be
wasting your money.
(P.S. From my experience, a Honda Accord
is one of the best cars to own. They are well built and reliable, as well as
relatively inexpensive to purchase and maintain.).
If you own a BMW or Jaguar you might need
my next book When Your Car Repair Bills Exceed Your
Mortgage
Click on the link above to go to the
site.
Sincerely,

Austin C Davis
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