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Extended Warranties

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Comments

  • texasestexases Posts: 8,917
    What 'they said' means nothing. Only what's in writing.
  • If it makes you feel any better, I just signed up for a PowerShield Enhanced plan via Warranty Direct and have similar payments. I had a similar warranty on two previous cars and MORE than got my money's worth.

    I take many of the complaints about Warranty Direct with a grain of salt. Many people purchase these plans without reading the contract, and then they get mad when something isn't covered (even though it was clearly stated in the contract).

    I think it all boils down to preference. Would it be better to just open a savings account and put $100 in it each month? Maybe--depends who you ask. What I will say is that Warranty Direct IS legitimate, and they have paid out THOUSANDS of dollars toward my repairs over the last few years. The only complaint I can possibly think of is that sometimes, late in the day, their claims dept didn't get back to my mechanic, and I ended up having to leave the car overnight. Ultimately, they always paid, though.
  • In the past couple of months, my 2008 Scion Xb with 70,000 miles on it has needed one rear brake caliper and both rear wheel bearings.

    In the two separate service incidents at my local Firestone dealer, they authorized both repairs, paying 100% of the costs. This would have cost me almost $1,300. I paid $975 or so with tax for the warranty from my credit union. I couldn't be any happier, unless the repairs were not needed, and I could qualify for a refund of an unused warranty!

    I have almost 2 years and 30,000 miles left on this thing, and it has paid for itself in about 45 days!
  • MY Son, An ARMY enlisted man, purchased a 2006 Dodge Ram 1500 with 62K miles, financed via MILES with $2000 of the loan for an extended warranty via Warranty Solutions (under Wachovia Management Corp, now part of Wells Fargo). He put 30K miles and the engine destroys itself. He changed oil every 7500 miles, and had proof: but when the engine was torn down for inspection ($675 labor at a Dodge dealer) for the claim, shellac is found everywhere. The oil pickup tube has loose metal (bronze and steel) shavings over it (however oil/air flow thru it). All from the timing chain breaking and disintegrating it's guides, ,which made the pistons hit the valves, etc. shutting the engine down.
    The truck was at speed when it happened, so much more damage than had it been at idle.

    Warranty Solutions response: "we see shellac or sludge, we deny" . Contract doesn't say "see" anywhere, it says "caused by". Two mechanics doing the tear-down agree that no sludge was involved and that the 'shellac' on the oil-splashed surfaces is typical of a hot engine at 90+K miles (all 'friction' surfaces were pristine, including piston walls, and rod bearings checked).
    So son files a formal appeal request, with a detailed rebuttal of the garbage from the 'inspector', and Warranty Solutions says they will send another inspector. They don't, instead sending the same guy out, to signoff on his original report (cover himself), all while the Dodge mechanic is showing him otherwise.
    So now my son must put $7000 into a remanufactured longblock install, on a truck he is still paying on. That includes the $675 in labor charges for the dealer to do the tear-down for the inspection!
    Bad enough that my son doesn't make enough to be above the US poverty level, but to get the 'shaft' from a company that was "servicing" mainly Military members is just sad. He survives Iraq, with a wife and newborn back home, only to come back and have this happen.
    MILES (www.usmiles.com) should stand up for the products they market and package with their loans (at 17%apr btw).
    Wells Fargo (now the parent of Warranty Solutions) clearly is concerned more about conservation of their wealth, rather than providing a service they were paid dearly for.

    In the end: putting away a nest egg for repairs and keeping it growing during every car you purchase is a good idea (at least until the NEXT emergency comes to take it all away).

    Beyond extended Warranties with a Manufacturers name on it, these others (if you are talking about small stuff) will probably honor repairs. But really Big stuff? They will go out of their way to ensure that THEY do not pay out a dime.
  • ken117ken117 Posts: 249
    Good story which demonstrates why most "experts" advise against an extended warranty, really an extended service contract as only the OEM can issue a warranty. Dealer Finance and Insurance people are well trained in how to persuade customers to purchase high profit items such as these.

    As you indicated, people would be much better served if they simply put the additional monthly car payment which would result if they purchased an overpriced service contract for the dealer and into a bank account to be used if needed. Of course, if there are no repairs the buyer has the money rather than the dealer.

    Also anyone interested in an extended service contract should indeed only buy one from the OEM. Also, those contracts which are sold at the time the vehicle is purchased are greatly overpriced. Usually, they can be found on line from a dealer at a much lower cost.
  • texasestexases Posts: 8,917
    "A reporter is looking for a new car buyer who is financing their car for 84 months or longer."

    A.K.A. "Debtor-for-life"...
  • ken117ken117 Posts: 249
    Financing for 84 months is not necessarily a bad thing. It depends on the interest rate. A person can always pay more each month effectively reducing the term. A lower required monthly payment coupled with paying off the loan ahead of time can be very helpful if a person has a short term cash flow issue.
  • Kirstie_HKirstie_H Posts: 11,077
    True, it can be a good solution as long as you honestly think your cash-flow issue is short-term, AND as long as you have the discipline to pay extra each month once the cash is available. Otherwise, the additional years of interest and lack of progress in paying off principal can be a real shocker, especially if the owner wishes to trade-in prior to paying off.

    Last time I paid cash, but otherwise, I usually take out a 5-year loan with payments I know I can comfortably afford, even if I have a (not totally drastic) change in income. I then pay $50-100 extra each month. That plan fits my comfort level better than a shorter-term loan.

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  • sbuhlersbuhler Posts: 108
    I am looking at the following two choices for a vehicle service contract on my 2010 Saab that does not have a factory warranty due to Saabs bankruptcy.

    My 2 options are:
    1. Saab Secure Warranty backed by Allstate Dealer Services (administered by Pablo Creek)
    2. Service Shield backed by Amtrust Financial (administered by Royal Administration Services)

    Both of these plans that I am looking at are exclusionary (OEM-type) policies. # 2 is somewhat cheaper than # 1.

    What are your thoughts?

    Thanks!
  • skyfan1skyfan1 Posts: 37
    I am just adding to your question; don't have an answer. I have a Nissan Altima that is about 30 months old with about 14,000 miles on it. I am wondering if I can get an extended warranty or not. I am still undecided about it. I notice most people say if you have a Honda or Toyota they are really reliable. What about an Altima?
  • billy3554billy3554 Posts: 148
    One thing about an extended service contract is you pay the money and it is gone. On the other hand, without an extended service contract, you still have the money. Of course you may have to pay the money in the future if a covered event actually occurs but, with many of today's vehicles, you will more than likely not have to pay it.

    An extended service contract is very expensive insurance. Extended service contracts are written to protect the provider and the small print is, as intended, difficult for most to understand.

    What really bothers me about such contracts is the amount of profit a dealer makes. For example an extended service contract for which a buyer pays $2k might actually cost the dealer $800 or so. People should ask themselves if they really think paying a dealer over a thousand dollars is a good deal?
  • ken117ken117 Posts: 249
    Actually, this might be illegal. Remember dealers do not provide financing. Lending institutions provide the financing. No lending institution requires a purchase of an extended warranty.

    Lending institutions will provide the dealer with the interest rate for which a buyer qualifies and will also provide the maximum amount of the loan they will finance. Often times this amount is more than the price of the vehicle.

    The less honest dealers will often inflate the interest rate or pad the loan by including costly add-ons to get as close as possible to the maximum amount the lending institution will finance.

    Those less than honest dealers will receive a portion of any additional payment resulting from such a padded interest rate as additional profit. This appears to be what they did to you.

    Clearly, in the worse case you qualified for a five percent interest rate. Since that is high in today's market my bet is this five percent was inflated by the dealer and you actually qualify for a lower rate.

    At a minumum you might want to go to Capital One Auto Finance on line and apply for a loan to see what they will offer you. Since you have already bought, Capital One has refinancing options. As a benefit, if you refinance the dealer will lose the profit it thinks it made on your financing.

    Personally I would have run from this dealer as fast as possible. There are far too many red flags.
  • buyabuya Posts: 74
    If you can cut a good deal, sure. 84-months is just 7 years.
  • texasestexases Posts: 8,917
    "Just 7 years". Most of which the buyer is upside down, owing more than the car is worth. Better to buy a car on can afford in 3 years, keep it for 7, and pocket the savings.

    Can an 84-mo loan work? Sure, but the folks with the financial discipline to do it know they'd be better off with a shorter loan. Most 84 month loans are to let folks buy more car than they should. Any financial bump in the road and they're in the ditch.
  • texasestexases Posts: 8,917
    The problem with 3rd party warranties is that many are worthless, with bankrupt companies and refused claims too common. How to tell the 'good' ones from the 'bad' ones? Who knows!

    Here's a good article in Car and Driver describing the problems:
    Problems with warranties
  • billy3554billy3554 Posts: 148
    If a buyer is worried about the reliablity of a vehicle to the point they think they require a costly extended service contract, perhaps they should not buy the vehicle. Rather, buy a vehicle with a stellar reliability record. As a further benefit those vehicles will have a higher resale value.

    A third party extended service contract is like a bad gamble, even worse. People should consider those old US Fidelis commercials pitched by Rusty Wallace and research how people found the actual experience of dealing with Rusty and US Fidelis.

    The reality is an extended service contract is rarely a good decision. For a limited number of people there may be a benefit. However, for the majority money spent on such a warranty is money wasted. There is a reason most independent experts, not those with ties to dealers, advise against such contracts.

    If a person really wants an extended service contract, they should only buy it from the manufacturer. Any other source represents an unacceptable risk and most likely a waste of money.
  • karhill1karhill1 Posts: 163
    There are many instances when a longer loan can be valuable. They key is to make sure the financing rate is not too high with an extended loan period. People with a longer loan can pay it off early. However, they have the advantage of a lower payment should financial issues arise.

    Than being said, I would never take a 84 month auto loan unless it was at zero percent. In that case an 84 month loan would be free money.

    Owing more than a car is worth is not inherently bad. People only get equity in a vehicle if they have paid for that equity. Equity is not free. With a zero percent loan, for example, why pay upfront for equity when that money can be put into an interest bearing account resulting is a small profit?

    The reality is each buyer is different and each has a different set of needs and desires. There is no single set of rules applicable to every person.
  • spikaelspikael Posts: 3
    So, I just bought a 2010 Jeep Grand Cherokee with 78,000 miles. I am looking into an extended warranty and trying to decide what to do. I plan on keeping the car for hopefully quite a few years. I have been quoted prices through the dealer and then directly through Mopar (Chrysler). I am leaning more toward the Mopar extended warranty since I can pay on them monthly with no interest. They are a few hundred dollars more than the dealer but I would not have to shell it all out immediately out of pocket. That's the hard part. With it having higher mileage I am just concerned about issues coming up as it keeps going up.

    I know there are cheaper warranties through ChryslerWarrantys.com and another site that I found on here. Given the mileage on the car already I was thinking it would probably be smart to do the Max Care for 5 years which would cover me until just 140,0000. Based on the mileage the price would be 3,800 and would let me put 10% down and then pay monthly interest free. Which level would you recommend? I am leaning more toward the Max Care based on peace of mind and $100 deductible each time. Either that or the Added Care Plus. I am ok with paying a bit more for peace of mind but don't want to waste money. I know it's hard to say what will happen in the future but would this be worth it? The Maximum Care plan covers everything except things that are affected by normal wear (brake pads, shoes, rotors, drums, belts, glass, paint).

    Any advice would be greatly appreciated.
  • texasestexases Posts: 8,917
    The price may have little to do with the value. No way to tell if the one you find will actually pay up.
  • texasestexases Posts: 8,917
    What I said was the only one worth getting is the factory-backed warranty (Ford, GM, etc.). I would not buy anything else, if I was to buy one.
    But I won't, they're not worth the cost on average.
  • ken117ken117 Posts: 249
    An extended service contract (aka extended warranty) on a vehicle with 78,000 miles has got to be riddled with exclusions. Best to read the contract completely.

    Probably be better to skip the extended service contract and use the money to buy a vehicle with less mileage. Can not think of a valid excuse to justify spending $3,800 for a contract which is most likely useless. Not sure about you, but I can think of a lot better ways to spend $3,800.
  • karhill1karhill1 Posts: 163
    And we should not forget that probably $1,900 of that $3,800 is dealer profit.
  • suzyrsuzyr Posts: 3
    $3,800 is too expensive, i know that the price can be negotiated. Some people say that they were able to drop the price by 1.5 - 2K. Dealers are usually very pushy and want to sell the warranty to you, if they don't want to drop the price, just go to a 3rd party and get it cheaper from them. But make sure you pick a trustworthy company that "has been around for a while."
  • ken117ken117 Posts: 249
    There are three concerns with an extended service contract.

    First is obviously the price dealers attempt to charge. The contact probably costs the dealer $900 or so for a five year contract. The dealer will attempt to sell this to a buyer for $2,000 or more. I doubt many people would be happy with a dealer making more than 100% profit. After all those same buyers probably spent hours dickering over 5% profit on the vehicle itself.

    Second is the limited length of the contract. A five year contract is really only for two years, one in some cases. Is it really smart to spend $2,000 for twenty-four months of coverage? Most likely a person would be better served to assume there will be no covered repairs during that period which would cost more than the cost of the contract. After all the contract is priced that way. If the service contract provider sells the contract to the dealer for $900, that provider is certain the amount it pays out on average will be far less than $900.

    Third is the small print, which is always available for the contract provider to use not to pay. Example, the covered component failed because he noncovered component failed so, sorry, not covered.

    If a service contract is desired, it should only be bought from the OEM. All third party contracts are inherently risky. Also, the contract should be bought after the purchase from a different dealer. The dealer selling the vehicle is counting on the convenience of adding the contract to the financing. This will almost always result in a person paying far too much for the contract.

    Finally, as with the service contract, any F&I product kindly offered by the F&I manager is overpriced, can be purchased elsewhere for a fraction of the price, and is usually useless. And really, what does an F&I manager actually manage? It is the dealer's profit.

    Any interested in the F&I goals of a dealership should research on the web. The man behind the curtain will be revealed.
  • steverstever Posts: 52,462
    "The Consumer Financial Protection Bureau has issued subpoenas to U.S. auto lenders over the sale of extended warranties and other financial products, according to people familiar with the investigation, expanding a civil probe that lenders say could slow the booming car-loan industry.

    Add-on products, such as extra insurance, are a popular mechanism used by car dealers to boost profits.

    Though such products are legal, regulators are probing whether terms and prices are adequately disclosed.

    The Justice Department, meanwhile, is probing auto dealerships that make their own loans to customers with poor credit and charge higher rates."

    Regulators Scrutinize Auto Lenders Over Add-Ons (Wall St. Journal - you may have to do a net search for the story if the WSJ link won't open for you)
  • jipsterjipster Louisville, KentuckyPosts: 5,722
    Yes on extended warranty. Altimas are reliable, so I'd pass.
  • txfatboytxfatboy Posts: 3
    You people have no idea what you're talking about. When you purchase a vehicle from a dealership it's unlikely the problem, if there is one, is with the "warranty company". Mitzi is the only one whose statements are at all accurate.

    Pretty much every company will offer a variety of contracts depending on the age and mileage on the vehicle. This allows you, the consumer, to decide if you want to spend MORE money and have MORE coverage or spend LESS money but get LESS coverage.

    The problem is that people select the low end contracts and the get angry because they don't cover an item that fails on their vehicle. They refuse to spend the time necessary understanding what is and isn't covered before they make the purchase decision. If a company offers 5 different contracts and you choose the lowest level of coverage then it's YOUR fault if it doesn't cover what you wanted it to. READ the coverage and stop letting a finance person tell you it's "bumper to bumper". Outside the manufacturer's base warranty, and there are exclusions in that as well, there is no "bumper to bumper" coverage.

    Companies fail everyday, that's a fact of life. But to try to claim every 3rd party, or aftermarket, warranty company is a ripoff is just stupid. If you purchase a plan on your vehicle based on a phone call, email or card in the mail and that company has done nothing to verify that your used/high mileage vehicle is in good shape you're just asking to be ripped off! Quit trying to blame the company for your lack of understanding your contract and your failure to know what you are buying. If you want a lot of coverage then buy their best available warranty.

    Most have 2 different types of coverage. One is what is known as "stated component" coverage or contracts. This means to be covered the failed component MUST BE SPECIFICALLY NAMED IN THE CONTRACT to be covered. The other is an "exclusionary contract" which means if a failed component is not EXCLUDED in the contract then, barring a condition or cause of failure that is excluded (lack of maintenance, damage or modification), then it is covered.

    KNOW WHAT YOU ARE BUYING!!!!
  • texasestexases Posts: 8,917
    edited July 2013
    Interesting sales pitch. Doesn't agree with what other (non-sales-related) studies have found. The industry has lots of problems. All of them? No, but enough to make it not worth the expense for something that, on average, is GUARANTEED to cost more than one get in benefits.

    Here's what Consumer Reports had to say:
    "Don’t purchase an extended warranty on a car with a good reliability record. In a 2008 CR survey, 65 percent of respondents said they spent much more for the contract than they got back in savings on repairs."

    And here's what Car and Driver said:

    "The TV commercials are slick and convincing: Buy a “service contract” for your out-of-factory-warranty vehicle—even if it has more than 200,000 miles on it—and never face repair bills again.

    Too good to be true? Probably. Three principal companies that sell these extended warranties—US Fidelis (the largest), Mogi, and StopRepairBills.com—as well as about 35 others, operate in the St. Louis area. All have websites, but business is conducted only by phone, with salespeople paid by commission, working from a script.

    Illegal? Probably not, but Michelle Corey, head of the St. Louis Better Business Bureau, says the sheer volume and ongoing complaint patterns involving industry giant US Fidelis, as well as complaints against numerous other St. Louis–area extended-vehicle-service-contract companies, are “nothing short of astonishing.”

    “We continuously are receiving reports from consumers saying they have been pressured or misled into buying warranty contracts they either don’t want or don’t need, or have been left holding the bag when the claim-processing company refuses to pay for costly repairs,” she says. US Fidelis, as well as Mogi and StopRepairBills.com, has an “F” grade with the St. Louis BBB, the lowest possible."

    Like I said, too many bad apples in that barrel.
  • karhill1karhill1 Posts: 163
    Actually, the "experts" strongly advise against buying any extended coverage except from the OEM. Pretty much every third party company which sells extended automobile service contracts is simply a risky bet. As an example, let us all recall Rusty Wallace and US Fidelis, among others.

    And truly, people are justified in blaming both the service contract company and the dealer for a bad service contract. Both engage in highly deceptive practices which often staddle the legal limits to entice customers to spend thousands for a product which is designed to be of limited value.

    Those third party companies design their plan descritions to confuse unsuspecting customers. They provide pretty summaries in large print which give the appearance the plan covers more than it actually covers. They hide the specifics within the small print and technical wording which they know will not be read or understood by most people.

    Automobile finance managers who lurk in the F&I office are complicit as well. They present themselves as the customers advocate in the dealership and design presentations, often with props and records, to entice customers to buy various products at exaggerated prices. The work hard to limit the amount of time the customer has to review the service contract verbiage. They focus the customer to the large print while ignoring the details, where the gremlins lurk. Their focus is mostly on the huge commission they receive from each service contract sold. Such focus rarely results in a postive outcome for the customer.

    Certainly it is true many companies fail. However, most of those companies have not sold future service contracts to customers for thousands. Clearly a consumer must be far more vigilant as to the long term prospects of a service provider than with their local hardware store. Ask anyone who bought a service contract base on Rusty Wallace's recommendation.

    The best advice anyone can give regarding an automobile extended service contract is do not buy one. Today's vehicles are generally well designed with few problems which would be covered by any extended service contract. Instead buy a vehicle with a solid reliability record. Put the money that would be spent for an overpriced extended service contract in an interest bearing account. That way it is there if you need it. Better yet, it is there and not in the pocket of the service contract company or F&I manager if you never have a repair.

    And remember, any time you buy a product in the F&I office a large amount of the money you pay is simply going into the pocket of that smiling F&I manager sitting across the desk. The money the F&I manager made during your half hour visit is the reason for that smile.
  • txfatboytxfatboy Posts: 3
    There are no "experts" when it comes to making a blanket statement that covers everyone's needs. There are advantages to buying OEM and there are disadvantages. There are advantages to buying aftermarket service contracts. Your advice to not buy one is just as stupid as saying only buy OEM. THOUSANDS AND THOUSANDS of dollars are paid out daily by these companies for repairs that would otherwise have been paid for by individuals.

    Ask someone who has had a catastrophic engine or transmission failure or an a/c system that's wiped out if their contract was worth it. But it's not just those problems. There are plenty of vehicles that have never had transmission or engine problems but have electrical, suspension and numerous other issues that MORE than pay for their plan. Obviously the idea is for the contract to pay out less than the money they take in, it's a BUSINESS! If you have enough money to cover repairs if needed without breaking the bank then don't buy one. Unfortunately, most people buy more car than they can afford and can't properly maintain their vehicle let alone pay for repairs.

    The bottom line is KNOW what you are buying. Don't let someone tell you "it covers everything" without having them show you where it says that in the contract. And try paying attention when they are going over the coverage and ASK QUESTIONS and make them show you where your question is answered in the contract.
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