Cons of Extended Car Warranties

Consumer Behavior on Extended Car Warranties

There are a lot of thoughts and opinions from consumers when it comes to extended car warranties. These opinions range from the mere selection of extended car warranty to outright rejection of the idea behind the service. Many consumers feel that companies offering extended car warranties are playing a numbers game, where the goal is to maximize profits by selling policies without regard to what the consumer thinks.  While this is an unfair opinion for reputable car warranty companies, it is a collective consumer opinion that is hard to change.

Cost Consideration in Extended Car Warranties

One disadvantage of extended car warranties is that the cost in buying the service is higher than the cost of repairing your car under the warranty.  Part of the reason why this is true is that extended car warranties usually support pre-existing manufacturer warranties and car insurance; in which case, there is no need for extended car warranties because of the redundancy. If you are a new car buyer, you must understand how warranties and car insurance work together, and if you decide that you need more coverage other than the services already offered, then you can consider extended car warranty programs. An extended car warranty will help you a lot if you understand what it should do. Do not buy an extended car warranty without reading the terms first.

Companies that offer extended car warranties are usually insured by other financing companies to serve as a safety net if the warranty claims overwhelms the financial capability of the company. However, this is not a foolproof method since some warranty companies can go bankrupt. When they declare bankruptcy and start denying claims, then your extended car warranty has no value. To avoid this, pick a reputable company backed by an insurance agency.  If the company tries to shoulder these claims without insurance, this should be a red flag for car consumers.

Extended car service warranties also play the numbers game when running their business. In this case, they are not run differently from insurance companies. Companies that provide these extended warranties design their policies based on the crash and defect rates of past vehicles. Unlike manufacturer warranties where policies are based on reliable production data, extended car warranties may build a policy on inaccurate data since they resort to assessing previous vehicle performance. This becomes a problem when a new model is released since only the manufacturer has a rough idea how these car parts work and what part will likely break first.

Waiting for Warranty Claims

The terms of a service agreement in an extended car policy can be also inefficient for consumers. Some companies require a thorough inspection of the broken car before they award the warranty. In addition, you have to do erroneous steps to process your claim such as getting a quote for the repair, talking to the car repair shop, and relaying the information to the warranty company. Getting your car repaired may take weeks and may force you to lose you a lot of hours and productivity.

Some extended car warranty programs are non-transferable from one car unit to another. If you buy a non-transferable warranty, then you should be prepared to use the car for more than three years to gain the benefits of the warranty.  If you think that you will trade-in your car three years down the line, an extended car warranty is not recommended.

Car extended warranties have various exceptions that differ from one company to another.  It is important to understand these exceptions before you decide if you need the extended warranty. Know what is covered by the warranty and what is classified as standard wear and tear. Make sure that they describe the parts that will be covered in writing.

Alternatives to Extended Car Warranties

If you think extended car warranties are not right for you, there are other methods of repairing your car at little cost. One alternative is to set money aside for car repair into a savings account and use it when a repair is needed. You must also remember that bumper-to-bumper extended car warranties are not the only warranty programs in the market. Variants of extended car warranties include wrap warranties, inclusionary plans, and powertrain warranties.

Wrap warranty is a specialized coverage designed to avoid the duplication of coverage of other warranties. This is useful if you do not want your extended warranty to overlap. Inclusionary warranties describe a specific component or set of parts that the warranty will cover.

If you are concerned about a specific component in your car, you can apply for inclusionary plans. Powertrain warranties cover the engine, transmission, and drive axles; all critical components of the car that owners cannot risk losing. If you have a high mileage car, powertrain warranties are perfect for you.

For more information about extended car warranties visit Car Buying Tips.com at:

http://www.carbuyingtips.com/warranty.htm

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