Consumers are often offered extended warranties from vehicle dealers when they purchase new or used vehicles. Extended warranties can be great products because they offer peace of mind in the event that your car needs to be repaired after the manufacturer’s new car, or dealer’s used car, warranty is no longer in effect. But there is an important thing to know about extended warranties – they are not all created equal. Those offered by reputable dealers are fine but many third-party ones aren’t. Here is what we want you to know:
About “third party”
A third-party warranty is so named because it does not have direct involvement in a two-party transaction. In the event of a car sale, the car dealer is the first party and the second party is the customer. A third-party is another unit that gets involved, such as a company selling their extended warranty.
Be Careful
As we mentioned, a third party extended warranty offered by a good car dealership is bound to be a good product but the others out there can be weird. The problem is that many seem to have great coverage and are affordable but the companies that make them available don’t seem to be in business for long. And those that stay around, never seem to cover the parts that stop doing their job on your car due to numerous exclusions. And who pays the car repair bill? We recommend that you decide to get a third-party extended warranty you get one that pays the shop directly for repairs, as there are some third-party warranties out there that require an out-of-pocket payment from you first leading to reimbursement–however, a reimbursement process usually takes weeks or even months to complete.
We Really Want You to Proceed With Caution
Third-party extended-warranty problems are quite widespread! Here are some of the FTC’s advice on how to keep yourself away from problems. We have thrown some of our own tips in, too:
Stick with the manufacturer – The best way to avoid extended warranties that aren’t quite real is to have coverage with a manufacturer’s extended warranty. For example, if you buy a Chevrolet and General Motors makes available an extended warranty, you may be assured this is a solid product.
Look up the company – If you’re considering a third party warranty, Google the company that offers it and look for any feedback and complaints from warranty buyers. Also consider checking with your state’s Consumer Protection office. One other reputable source is your state’s Better Business Bureau website.
Know what’s covered and what isn’t – This is usually the biggest source of confusion with extended vehicle warranties. Although they’re called extended warranties, they usually don’t function the same way that an original “bumper-to-bumper” warranty does. Think of these as contracts that cut down your costs incase high-priced repairs have to happen, not for the minor things that original warranties take care of.
In general, don’t be afraid of extended warranties when they’re from a reputable local car dealer. As you might think these warranties will cost a bit more but with one of them you’ll have the peace of mind that your vehicle will be taken care of. They can be a great product that eliminates risk if you decide to keep a car for a long while, but the bottom line is to be aware of how many third party extended warranties are not good to have, so be careful if you are thinking about getting one!
Article Courtesy of: Thompson Mazda
