When you're looking at buying an extended warranty for a new vehicle, there are a few issues to look into:
First, research whichever company you are planning to buy a warranty from. Websites like Warranties Direct, 1 Source Warranties (which, BTW, I've heard negative/horror stories about), AutoServiceContracts.com, WarrantyByNet.com, WarrantyGold.com, et al, are simply sales agents who sell a policy from a national insurance company. In cases, the agency will be owned by the parent insurance company, but not always. It doesn't make a huge difference if you do your homework. Make sure the PARENT company is going to be around. Is it a company you have heard of? Whoever provides your car insurance might also provide extended warranties. These companies will most likely be around to honor the warranty. If you haven't heard of the company, do as many searches for information on them as you can. Ask tje selling agent as many questions (including "tell me about xyz company") about them as you can think of. If you're at any point unsure of this company, or read something bad about them (use your own judgment on what is a genuine complaint, and what is an irate customer who wants them to cover something outside of the contract), then move on to another company you
do feel comfortable buying from.
Second, and really just as important as the first point, is the actual claims process. You are going to be dealing directly with the insurance company for claims, and they employ many people who have it in their minds to deny every repair they can, if they can extract enough information out of you or your mechanic to justify doing so according to the terms of the contract... or in cases, based on terms
not in the contract. An example being, the contract might state that a part, say, suspension control arm bushing, is covered, but the fact that it is squeaking and not clunking might easily give them reason to deny the repair due to the squeaking being from normal wear and tear, which is of course excluded from the contract.
More on claims process... ask your agent EXACTLY how the claims process goes. Most likely, you will get something jolly and good, like...
"Say you have a breakdown... well, you take your car to an authorized repair shop or dealer, and have them diagnose the problem. They call our claims authorization number, get a credit card number from us, and an authorization number, and make the repair. All you pay is your x $ deductible!" ... sounds great.
First issue to deal with is the repair shop or dealer that doesn't want to deal with a warranty company. They may have had past (bad) experiences with getting charge backs on payments, or no payments, among other things. They may not have the time to wait on hold with the warranty company, or may not like dealing with the sometimes quick to try to deny coverage claims officers.
Another issue to deal with, assuming your repair is covered and authorized, is the actual payment. Does the contract CLEARLY define who will be paid, and by which method, and when, after a claim is authorized? Or does it cover the entire payment section of the contract with "You will be reimbursed for all authorized claims"? if it is not clearly defined who pays who, and when, and by which method, you could and will be looking at being hassled to get paid for the repairs. First of all, they will tell you that the company policy has changed and they no longer pay by credit card unless in the case of an emergency repair. This means you will have to pay your repair shop and then deal with getting reimbursed for your repair yourself. You will have to get a fax number from the claims officer, and fax a copy of your invoice, with authorization number and ABSOLUTELY NO errors in information, names, part number, amounts, etc. Everything has to be in line and to their liking. Then, they will mail you a check. Sometimes in 5 days you will get it... sometimes two weeks, sometimes a month. Since your contract doesn't state the payment terms with a "within x days" mention, they can take all the time they please to pay you. And they probably will.
Once you get the check, you will have to put it in an account in your name, and clearly endorse the check with your name, otherwise they might refuse payment on the check.
Yeah, it sounded simple and straightforward. To get your claims authorized and paid, by any method, either you or the service advisor/manager at the shop or dealership you use for service, will have to make at least 3-4 phone calls, likely 1-2 faxes, be patient, calm, and precise with the warranty company. Not to say it can't be done, it just can be more of a hassle than you might think.
What to look for to avoid what I just outlined, is a clearly outlined authorization and payment section of the contract, that includes timely payment to the repair shop by credit card before or immediately after the repair. You might not find that, and in that case even if the salespeople promise payment to the shop by credit card, I would assume that they will likely want to reimburse you by check well after you paid for the repair.
This sort of explains why some repair shops and dealers don't
like to deal with extended warranties.
Do yourself a favor, and get the claims authorization number before you buy a contract. In the event that you have to deal with these people, it helps if they are courteous. Call them up and ask for them to explain the claims process. If you're greeted with a snotty tone like "this is the CLAIMS line, sir!" then perhaps they could use a few more employee relaxation breaks. /w3tcompact/icons/wink.gif Not to say the company is good or bad based on the operator you get just making a call to their claims center, but IMO it's worth a few minutes to call them. You just might get on the line with someone willing to tell you a bit about the company.
The other important consideration to look at is the coverage of the contract. Read it carefully. If you're buying a new car, do not buy a contract that covers parts listed. Only buy a contract that covers "everything but" a list of "not covered" parts and items. Usually things like brake pads, interior and exterior trim, light bulbs, wheels and tires, windshield wipers, etc. Also of course, guidelines for what type of maintenance you are required to perform to maintain the warranty coverage can be expected, and you may be required to produce documentation in the event of a major failure of a major component like the engine or transmission. Additionally, I have heard of insurance companies sending out technicians to inspect a repair before authorizing, if it is expensive enough to justify one last ditch effort at denying coverage. /w3tcompact/icons/wink.gif This is routinely done with manufacturer warranties as well, if a major part fails. Definitions of these types of things would be nice to see in a contract, but I doubt you'll ever find a contract stating something along the lines of "we'll do everything we can to deny your coverage."
Other things to look for in the coverage section, are restrictions on things like turbos or superchargers if equipped, factory-installed trailer hitches, alarms, and other options.
Also, parts damaging other parts is a tricky area that can leave you with expensive repairs not covered by the warranty. Say an abnormally worn and loose timing belt snaps or skips at 37,000 miles, and although replacing the belt might cost $200, the failure left the engine with bent rods and damaged valves (maybe more), and $3,500 in damage. Does the warranty cover all that the timing belt "took with it", or just the belt?
While you're at it, read the "only covered if" parts of the contract
real carefully.
Even considering these warnings, the coverage on new car contracts is generally very good, and in most cases a "bumper to bumper" policy that covers everything on the car except a list of not covered parts, will leave you with manufacturer warranty-like coverage for up to 84 months/100,000 miles.
As for justifying the warranty... it's really just like any other insurance. On one policy I haven't made any claims. On another, it had paid for itself plus $250 in less than a year.
BTW, I have dealt with AutoServiceContracts.com and WarrantyByNet.com on the sales end, and Heritage TPA and Royal-Sunalliance on the claims end, and would deal with either again. However, the same coverage from Royal was about half of what Heritage was. FYI, WarrantyByNet.com no longer sells Royal-Sunalliance policies. I'm not sure
what they sell. /w3tcompact/icons/wink.gif
Hope this helps...
