Auto warranties --- avoid the rip-offs!

Hope you all had a wonderful and safe holiday! Please excuse my recent absence, but starting today we're getting back to business.

Now, let's try and save everyone some money and hassle when it comes to auto warranties.

First of all, in spite of the sometimes-confusing terminology you might hear when someone's trying to sell you a warranty, keep this in mind: "warranty" in this case is just a fancy word for "insurance policy." When it comes down to it, that's all a new- or used-car warranty is --- an insurance policy for car repairs. You pay the premium, usually in one lump sum after you buy the car; when it needs repair, the company backing the policy pays for them, depending on what's covered in the policy.

And they are very profitable for dealers, which explains the "hard sell" which usually surrounds them.

Normally, in a blog post like this, we'd talk mostly about the potential dangers of "third-party" warranties, those backed by companies not affiliated with the car-maker. There have been instances (one I remember happened with the #2 Japanese car-maker some 20-or-more years ago) when the third-party company backing the warranty goes out of business, leaving the warranty holders high and dry. It's very rare, but it's happened.
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But buyers never thought they'd have to worry about a warranty purchased at a dealership from the car-maker. Today, though, both Chrysler and General Motors are putting out confusing messages about their own factory-backed warranties. That has a lot of people worried, and rightly so.

Both companies are making noises about refusing to honor warranties on older cars and trucks, claiming those sales have become part of their "old" selves, "bad Chrysler" and "bad GM," the parts of the companies which are now being closed or sold-off as part of their respective bankruptcy and reorganization plans.

We came across the following information from the Service Contract Industry Council (www.go-scic.com), which describes itself as "a national trade association whose member companies collectively offer approximately 80 percent of the service contracts sold in the U.S. for home, auto, and consumer goods."

Here's what they have to say:

-- Most service contracts are sold face-to-face at the point of sale from reputable automotive dealerships. Many reputable providers administer and service the contracts sold through these outlets, and also sell them independently, some via the Internet.

-- Do not buy a service contract if the provider will not supply you with a copy of the contract terms and conditions prior to purchase.

-- Be alert to service contract providers who use unsolicited mass marketing techniques, such as direct mail and telemarketing (e.g. "robo-calls").
2009-07-05-2008Ducati1098R180HP.jpg Yes, warranties are available for most motorcycles, too, like this exotic Ducati --- the same rules apply as far as not getting ripped-off

-- Avoid purchasing service contracts if you feel overly pressured by sales personnel. Service contract coverage for autos can typically be purchased on the spot or days after the product purchase, giving consumers time to review the terms and research the provider (more on this below).

-- Thoroughly read and understand the terms and conditions of your service contract and be prepared to realistically fulfill all responsibilities related to regular maintenance, such as oil and filter changes, etc.

-- Some service contracts provide a 30-day, "free-look" period for consumers to review the contract and return it for a full refund if they decide not to purchase the service contract.

-- Consumers should locate the name of the service contract provider on the contract. If a contract does not list an administrator's contact information, contact your state Department of Insurance or the Better Business Bureau to determine if the company is authorized to do business in your state. Keep in mind that not all states regulate service contract providers and that many states exempt manufacturers from regulation.

-- While many "e-providers" offer competitive pricing and reputable service, use caution when purchasing a service contract over the Internet and guard against "phishing" scams; make sure you know who you are giving information to.

-- Maintain a dedicated file for contracts, receipts, and maintenance records and use the service contracts as often as needed and applicable to enhance product use and maximize investment.
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A couple of more points from us: perhaps most important, prices for these warranties are very negotiable.

After you decide to buy a car or truck at the dealer, the F&I (finance and insurance) person will hold you captive in a hot, tiny room in the bowels of the dealership, and try to sell you everything from undercoating to roof racks to "stylish" wheels to upgraded audio to security and alarm systems --- they'll also offer a warranty.

It's at this point, if you decide you do want the warranty, that you turn-on your negotiating power (or what's left of it after going through the whole car-buying process). If the price for the warranty is $700, for instance, offer half that, and let the games begin.

But, depending on where you live, you may have up to a year to buy that new-car warranty, so don't let yourself be pressured --- there's really no hurry.

Take the time to make-up your mind; after you take the new car home, and you've talked with the F&I person about the warranty and know what their offer is, you can do some research and comparison shopping. In fact, in some states, you can buy a new-car warranty at any dealership which handles the same brand of car.

In future posts, we'll talk a bit about used car warranties (a relatively new phenomenon, and usually part of the new "certified used car" programs many manufacturers offer), how to make sure the warranty stays in-effect for its full time and mileage period, how and when to make a claim, what happens if you buy a car from a private party which has a warranty and more.

And if you have any specific questions on any automotive topic, or motor racing, or an idea for a blog post, don't hesitate to e-mail us at steveparker@roadrunner.com. Thanks!