Dealer extended warranties are priced just like the cars - if you pay full "sticker" they make very large profit margin (statistically).
Just like insurance, they have all the statistics (failure rates and repair costs) and you have little or no way to know what a fair price would be. If this makes you feel like a sucker, it should.
A warranty is an expensive purchase, so be sure and "shop around" on this as well. The price is negotiable, and there is nothing like a little competition to drive prices down.
Mfg's Factory will be the highest priced (even after negotiating it down), but will be the most likely most widely accepted at factory authorized service centers. You probaly don't have to worry about the larger mfg's going out of business on you.
Dealer-offered 3rd-party will probably be accepted at that dealer with no problem. Be sure and get one that pays directly and not a re-imbursement type where you have to pay and then beg and wait for the money.
Be sure and get a warranty where they list the specific things that are "excluded" with EVERYTHING ELSE INCLUDED in the coverage.
The reverse type where they just list the specific things that ARE covered (anything not mentioned by name is not). These type are based on the fact that there are a heck of a lot more parts in the machine than they list. The "engine block" is not likely to fail, and if they don't list the "front crankshaft seal" and you think its included in the "engine block" you will be in for a surprise.
Check that both labor and parts are covered with factory parts and no hemming-and-hawing about labor rates.
Check on pro-rating.
Check on deductables.
Some warranties have a "if you don't us it, you will get a partial refund". If you have a failure early, be sure and invoke the warranty. Don;t hold out to get the refund - it could cost you several repairs worth of costs! If you just wanted the money back anyway, why did you buy the warranty?
KEEP the paperwork!
Read the fine print and ask quesitons. Don't sign away thousands of dollars without knowing what you are buying. If the salesman seems in a hurry, ask him if you can take a copy of all the paperwork home and come back the next day to sign everything and complete the deal (emotionally painful, but this could save thousdands)!
Check on the business reputation of the warranty company (if not factory) before buying. It will be too late to find out they are bankrupt or fly-by-night when you have a claim later.
You don't necessarily have to buy the extended warranty right away - there is usually some number of days after a new purchase when you can still get the new warranty price.
Statistically, its better to not buy the warranty. If you self-insure yourself, then you get to keep the profits built into the warranty price, even if you have the statistically average number and cost of claims.
However, if you cannot afford to be without the machine and cannot afford to pay for a major repair if you "lose" the self-insurance bet, then the warranty might be appropriate for your situation.
Make sure the warranty covers the type of use you intend. For example, if you plan to do more than a little work for hire on the side, that might invalidate an extended warranty that excludes "commercial" usage of the equipment.
- Rick
