Are Extended Warranties Worth The Price?

An extended warranty can apply to an automobile or any other large purchase. But the truth is, they are rarely worth it. Truth be told, what they call an extended warranty is not really a warranty at all. It actually should be called a service contract. These agreements are usually tacked onto your automobile purchase or other large purchase at the time of sale. Car dealers attempt to get an extra one to 3000 dollars out of you by having you sign the service contracts and pay money up front for any repairs not covered by the product warranty.

Most car dealers will do everything they can to sell you a service contract by telling you that they can cover some large repair bills that are covered by the standard warranty. of course the reason they do this is the service contracts are very profitable. In fact, sometimes 50 percent of the money goes straight into profits on the sale. The reason they can get away with this is that the coverage is usually not what you expect.

Most of these these contracts have exclusions like these:

Lack of Maintenance Records? Failure to retain and produce records that the vehicle was maintained in accordance with the manufacturer's routine maintenance schedule. It is generally not enough to just maintain your vehicle. You must also be able to provide proof to the service contract administrator that the vehicle was maintained. No proof equals no coverage.

What about wear and tear? Parts in your car that normally wear out, such as brake shoes, and gaskets, shock observers, and even belts are usually not covered. These are considered normal maintenance items and are expected to wear out as your vehicle is used. Usually, no coverage here.

Damage caused by a noncovered part. Your contract may cover the entire powertrain but if a non-covered parts such as a hose should break and this causes major engine damage, the contract will not cover the engine damage, because the hose was not covered part.

Tear Down Diagnosis? Under many service contracts, prior to servicing the car, the repair shop will require the consumer to agree to be responsible for the tear down charges if the failure is not due to a covered part. Some repair facilities will even require the consumer to pay a deposit before they will begin to diagnose the problem.

Repair option restrictions. You may have a very difficult time getting your vehicle repaired due to restrictions in the contract as to where you can get the work done. Sometimes the contracts are very specific about who can do the work. On the other hand, some service contracts have gained a reputation of not paying so the service center won't even honor the contract itself. In that case, they'll ask you for the money upfront and leave you to try and get reimbursed from the contract company.

With all of the above hurdles, it is hard to imagine receiving any peace of mind if you actually need to use your service contract. Additionally, with the quality of today's vehicles the odds of needing a major repair during the first six years of your car's life are slim. The bottom line is to save your money. In most situations you will be farther ahead monetarily and have greater peace of mind by saving your money for a rainy day.

Article by: KarlW.Heinzel | Total views: 16 | Word Count: 580

About the Author

Karl and his business partners cover important legal issues such as Warranties and Auto Issues at http://lemonlawyer.wordpress.com They focus on California Lemon Law issues and are lemon law attorneys for southern California