3rd Party Extended Warrantees
What do they cover and what are the pitfalls?
When buying a used vehicle, many dealers will offer extended warrantees. While the thought of warrantee protection sounds fantastic, clearly examining the contract is critical before paying extra cash for what may be of little value.
First thing to know is that these warrantees are provided by a warrantee company who has no affiliation with the vehicle manufacturer. Their business is selling warrantees and to make a profit they must pay out as little in claims as possible.
While your vehicle manufacturer also wants to also do a bare minimum of warrantee repairs, they have their reputation at stake when something goes wrong. For a warrantee company any claim is a cost against their profit.
Secondly some warrantee companies have unrealistic requirements when it comes to routine maintenance services such as oil changes.
One company insists that oil be changed every 3 months or 5,000 kilometers and will allow only one extra month or 1000 kilometers. This is completely substandard to the automotive industry but yet you must follow their schedule to keep the warrantee valid.
Third item on the list is what the warrantee actually covers. Only parts listed on the contract are covered.
For most concerns this is adequate but I have seen several occasions where a faulty part is not covered because it is not specifically named in the contract. Diagnosis is also yours to pay. If your check engine lamp is on and/or your car runs poorly they will usually pay for the repair (provided the part is listed in the contract) but not the diagnosis.
Many times the diagnosis is complex and could cost you several hundred dollars. As a repair facility, we are responsible to repair the problem; coverage for that is what you paid for. Strangely though, they won’t pay for the process of finding out what the actual fault is. Also, items such as fluids and shop supplies are not covered. In the case of a leaking radiator for example, they will pay for your radiator and labour, but not the antifreeze.
Fourth concern is that repairs are limited only to the part at fault.
Here’s an example: if your automatic transmission has a problem, they will cover only the labour to remove and reinstall the transmission along with disassembly and reassembly to replace the faulty part. They will only pay for the faulty part and bare minimum of other parts to complete the repair.
While this solves the problem, usually an automatic transmission is so labour intensive to repair, that rebuilding it completely is the most cost effective way to go to ensure a proper, long life repair. This costs marginally more than just replacing the part at fault, yet they will not do this and so you, the consumer, are stuck with a substandard repair.
So there you have it: the dark side of that warrantee that sounds so good in the dealer’s office. There are good points and a warrantee -can- save you money. The important thing is to read the contract, look at the reliability records of car that you are buying and then make an educated decision.