What You Should Watch Out For On Warranty Plans

warranty plans

I think you have to automatically assume a 100 percent markup," Phil Reed, consumer advice editor at Edmunds.com, said about car dealerships offering warranty plans. The misconception about shopping around for an extended warranty quote online is that all the companies operate solely on the internet, with no formal establishment. However, car dealerships spend a good deal of time "shopping around" online as well. One of the most lucrative aspects of the car sales industry is the extended auto warranty. Many consumers are shocked to learn that car dealerships function like any other retail outlet, marking up not just the cars but all of the finer details as well. It makes sense, then, to do a little homework online and figure out what a reasonable price should be, prior to hunting for cars.

One common problem people run into is to fail to read and understand the agreement before they get work done. Knowing the right questions to ask your warranty company is crucial, experts say. For instance, ask if you can get the work done at any shop, or do you have to look for a certain certification, or in some cases return to the dealer? Additionally, is your car covered for "wear and tear" damage or just mechanical failure?

You should have a comprehensive list of all the parts that are/aren't covered! Sometimes you'll get a "bumper to bumper" warranty that covers everything except for the wear items, like brakes and tires, while other times you'll get a "power train" warranty, which covers the engine and transmission. While it's rare to find a company that offers coverage for everything, you should ensure that some of the most expensive repairs will be taken care of.

Additionally, beware of flyers and spam emails from companies offering warranty plans that seem almost "too good to be true." If the prices are far lower than everywhere else, it's probably not a good idea. If you can't find information about the company from the Better Business Bureau, avoid them. One thing you should be aware of is that there are some "companies" out there that look to cash-in quickly, only to go bankrupt in a few years, leaving you with a useless automobile warranty that no one will honor. Even some legitimate companies just don't have back-up financing, so if claims come pouring in, they run out of money and go belly-up. To protect yourself, look up as much information as you can before signing with a company and look for a longstanding track record.

If you're one of those consumers who buys a car and trades after four years, then you might be fine passing on warranty plans. By contrast, many leasers or auto traders still find some peace of mind by purchasing the coverage because they don't like unanticipated surprises setting them back. By five years or so, you could run into expensive brake work, transmission problems or a number of other mechanical failures that could add up. If you're a business savvy saver, this may not be a problem for you. At the end of the day, you have to ask yourself, "How rough am I on my car? What can I expect?"