October 4th, 2017 by

Should you spend the money to obtain an extended warranty when you buy a new or used car? Let’s discuss:

What are Extended Warranties?

Extended warranties offer car buyers and owners a measure of insurance that they won’t be hit with enormous costs should one or more of their car’s components fail after the original manufacturer’s warranty expires.

Legally speaking, extended warranties aren’t actually “warranties” (by definition, a warranty’s cost is always included in the price of a product). Instead, they are “service contracts” obliging the seller to perform certain repair services. Exactly what these services include (and do not include) is spelled out by the terms of the extended warranty (that’s why it’s important for prospective buyers to carefully read them prior to purchase).

Who Should Buy an Extended Warranty?

Three groups of car buyer/owner can benefit from purchasing extended warranties:

1. Those intending to hold on to their cars past the expiration date of the original manufacturer’s warranty.

2. Those buying a used/pre-owned car whose original manufacturer’s warranty has expired or is near its expiration date.

3.Those owning a car whose original manufacturer’s warranty has already expired, or is near its expiration date, who wish to use an extended warranty to add value to the vehicle car in order to maximize its resale price.

If you’re in one of these groups, extended warranties can definitely be worth it. While today’s cars are more durable and reliable than ever, their advanced technology components can often be difficult – and expensive — to repair. An extended warranty will shield you from having to bear the costs associated with such repairs.

Types of Extended Warranties

There are two types of extended warranties: manufacturer (factory) extended warranties and 3rd-party extended warranties.

Of these, factory extended warranties offer the best protection. If your car needs service, you’ll have the work done by a manufacturer-certified repair facility, using high-quality, manufacturer-approved parts. Additionally, there will be less “red tape” – and delay — associated with your repair, because authorizations for repairs will be faster.

Factory extended warranties also may provide useful additional services not included in those sold by 3rd parties. For example, GM’s factory extended warranties for Buick, Cadillac, and GMC, provide for:

– Use of a rental car for covered breakdowns
– Towing and road service
– Hotel reimbursement if a covered problem occurs more than 100 miles from your home

– Lost key and lockout coverage
– The ability to transfer extended warranty coverage to a new owner if you sell the car

3rd party extended warranties are sold by a variety of providers, and while they may be less expensive than manufacturer extended warranties, their terms may impose major restrictions – such as limiting where your repairs may be performed, the repairs that are covered, your ability to transfer the coverage, and other limitations – that reduce their value to the purchaser.

Additionally, not all 3rd party extended warranty providers have stellar reputations. For example, several years ago, National Auto Warranty Services (AKA U.S. Fidelis), a 3rd-party extended warranty provider, sold more than 400,000 extended warranty polices to U.S. consumers that weren’t worth the paper they were written on (the company’s founder is now in jail). You can Google “extended warranty scam” to learn about many similar cases.

If you’re intent on purchasing an extended warranty from a 3rd party provider, make sure the company is reputable. Check your local BBB, and verify the provider’s status with the Vehicle Protection Association – a non-profit organization set up to police the 3rd-party extended warranty business.

Things to Watch for in Extended Warranties

If you’re in-market for an extended warranty for your car, keep these points in mind:

1. Read the extended warranty’s fine print (yes, we know it’s painful but doing so will save you money and trouble). Understand what’s covered, what’s not, where repairs must be performed, by whom, whether there are deductibles, and how much these deductibles are. Pay special attention to the warranty’s Exclusion List (a list of service issues that are not covered by the warranty) along with the Inclusion List of service issues that will be covered.

2. Find out who is backing your extended warranty. Just because you’re buying your extended warranty from a car dealer doesn’t mean that what you’re being offered is a bona fide factory extended warranty. Take your time and do your due diligence – never sign anything until you understand the reputation and fitness of the corporate entity backing up the warranty.

3. Understand that extended warranties don’t have to be bought at the time of purchase. Be wary of dealers who try to pressure you into buying extended warranties at the time of purchase. These warranties can be bought at any time. Your dealer, however, may offer you financial incentives for purchasing an extended warranty that you may find attractive, for example offering to roll the cost of the warranty into your car’s financing.

4. Be wary of unsolicited extended warranty offers. Some disreputable 3rd party extended warranty providers have used devilishly deceptive means to trick unwary owners into believing that their original manufacturer warranties have elapsed. Consult your own records to verify if this communication is legitimate; if it isn’t, don’t take the bait, report the incident to your local consumer protection agency, and file a complaint with the Vehicle Protection Association.

Have more questions about extended warranties? Call City Cadillac/Buick/GMC at 866-590-2589 or use this website’s online contact form.

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