Tales From the Service Desk: Extended Warranties and the Selling of a Scam
During my brief career as a service writer, there were many aspects of the job that I found annoying, but perhaps nothing got my Irish up on a near-daily basis like the extended-warranty business.
It usually went like this – customer brought in a car that was out of factory warranty. Far enough outside of it that our factory reps wouldn’t take pity. Car had some serious issues that would almost certainly lead to a huge bill. Customer would then say, well, “I have an extended warranty”. When it came time to get the extended-warranty company to pay up, they’d fight like hell not to pay a dime.
Oh, and they often had a deductible. And while that deductible was sometimes a relatively reasonable $50 or $100, the customer was often caught unaware, and angry they had to pay even that much.
So in the end, I’d have a pissed-off customer (pissed at me for being the messenger, pissed at paying the deductible, pissed at paying for anything the warranty didn’t cover, pissed the warranty company was trying to avoid covering anything at all) and I’d be pissed off due to having to deal with extra stress and hassle.
Meanwhile, Scumbag Joe, the CEO of ScamCentral Warranty, Inc. is raking in the dough. Not hard to do when you sell warranties like crazy and then do your best not to honor them. And you probably pay your customer-service reps in the call center piss-poor wages.
This isn’t to say all extended warranties are bad, or you should never buy one. But you do need to think about it and do your due diligence before doing so.
This should be obvious, but if you don’t plan to keep your car past the expiration of the OEM warranty, don’t buy an extended warranty. And don’t fret if you end up keeping your car longer than planned – you can often buy an extended warranty from your dealer or OEM before the factory warranty ends, but well after you bought the car. Don’t let the F and I guy pressure you.
While I’ve heard some anecdotal stories of dealers fighting to not honor warranties they themselves sold, you’re still better off with an extended warranty bought from the dealer or OEM than from some company call AutoMaxShield or CarFix or whatever.
All that said, you probably don’t need the extended warranty even if you plan to keep your car past the factory warranty period. Modern cars are better built than in the past, generally, and therefore more likely to last longer without giving owners headaches.
Do the math. Compare the monthly cost of the warranty to what your local dealer charges for labor and ask yourself if you should be spending the money on the monthly payment if repairs aren’t likely to be costly. Maybe your particular model has a reputation for reliability and is unlikely to need much in the way of customer-pay work, especially if you maintain it well. Speaking of which, maintaining your car well will help keep it out of the shop.
Check owner forums to see if your model of vehicle has certain problems that tend to crop up with age. Read the fine print – know what’s covered and what isn’t, and what the deductible is.
And check out the consumer and Better Business Bureau reviews of any company that’s trying to sell you an extended warranty.
I know reading the fine print sucks, but do you really want to find out that your extended warranty doesn’t cover anything “electrical” – I experienced that once if memory serves – when the car is in the shop, torn apart, and someone now owes the shop money for parts and labor?
I’m only talking about dealerships here since I never worked at an independent shop, but I suspect similar problems arise at Joe’s Car Care as they do at Hicksville Ford. I’m also talking here about extended warranties only, not pre-paid maintenance plans.
Yeah, I get it. If an extended warranty does pay out like it’s supposed to, a repair can cost less out of your pocket, even with a deductible, than it would otherwise.
Problem is, it’s rarely that easy.
If you can, skip the extended warranty. If you can’t, make sure you buy one from a reputable source. Save yourself, and your service professionals, a lot of grief.
[Image: William Potter/Shutterstock.com]
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Here's the two cents from Joe's independent garage. Any extended warranties we had to deal with were a PITA. They were run like the worst "insurance" policies. Not only were there exclusions, deductibles, and co-pays the Ext Warranty companies had their own 'suggested repair times' (often known as flat rate). Our shop was told that the warranty would pay about 35% of the repair price which did not even cover the cost of the parts. The customer(s) did not want to cover the difference. Hey they had a "warranty". So you end up with an angry customer and a frustrated shop. We were not the high priced spread. No one was buying boats or motorhomes. I read some of the warranty info given to the car owners. It did not disclose the severe underpayment. That was only discovered after the car was already repaired and gone. And I also get solicited for extended warranties on a vehicle that is 25 years old that I sold nearly 10 years ago.
@Kendahl. Do you loan out your wife. Mine always looks at me and says we should have that even before price is mentioned. I figure she’s cost us about ten grand for extended warranties over the years. This on Honda’s and Toyota’s. Of course there has never been a claim Doomed to overpay. She’s a salesman’s dream buyer.