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Warranty purchasing tips
So where do you start?
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Shop smart. Don’t be fooled
into thinking that you have to buy an
extended warranty from the new or used car dealer, and that you have to
buy it when you buy the car. You don’t have to do either. Warranties sold by
dealers are often far more expensive than warranties sold by private
companies. Why? Because dealers make their money on after-market items, and
warranties fall into that category.
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Check out the repair history
for cars of your make, model and year -- a good source is
www.cartalk.com -- to anticipate possible repairs. Then, make an educated
guesstimate regarding the cost of repairs for the next several years. It will
help to review bills from the last several years before you project forward,
and it might help to talk to your mechanic. A good one should be able to tell
you if you’re on the money.
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Consider a cap on the repair
expenses you’re willing to incur without an extended warranty, and compare
that cap to the cost of extended warranties. Then, ask yourself how much
you’re willing to pay for peace of mind. If a warranty costs $1,200 for six
years of coverage, that breaks down to $200 a year. Put another way, it’s
less than $17 a month, or 50 cents a day.
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Make sure the warranty
companies you’re considering have reinsurance for all their policies – this
protects you in the event of any type of default. And don’t stop there. Make
sure the reinsurer is rated at least A (“excellent”) by
A.M. Best & Company. The highest ratings
offered by A.M. Best are A++ and A+ (“superior”), followed by A. The ratings
B++ and B+ are “very good”, but just one notch above A.M. Best’s “vulnerable”
ratings of B, B-, C++, C-, D, E and F. STAY AWAY FROM THESE! Before you sign
anything, check the fine print and make sure the name of the reinsurance
company is included in the vehicle service agreement.
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If you’re shopping on the
Internet, make sure you’re dealing with a reputable company that had a
bricks-and-mortar establishment before setting up shop in cyberspace. These
companies have a much more grounded (pardon the pun) understanding of the
business. Other vital questions to ask are these: Is the
administrator (the company that will
administrate and help you with your claim) a company that has been in the
business for a long time? Are they in good standing with the
Better Business Bureau? Is their privacy
policy approved by Truste or the BBB, and
does it actually protect you? Is the company’s website a secure website?
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Choose extended warranties
in your price range, and read the fine print regarding
coverage. Make sure that when you
compare policies, you compare policies that offer similar features. Remember:
apples to apples, not apples to oranges. And remember too that like in other
facets of life, you often get what you pay for. So what are you comparing?
Deductibles and types of coverage, as explained here:
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Deductibles. Extended warranties
come with a choice of deductibles. The standard is usually $100 per visit.
There are also companies that allow you to buy the deductibles down to $50
and sometime $0. If you like the plan you’re looking at but want to pay
less, consider a higher deductible, for example $200 per visit.
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Named Component Coverage.
This refers to an extended protection plan that lists the components and
parts of the vehicle that are covered under the program. These types of
policies are usually offered on vehicles with expired manufacturer’s
warranties.
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Exclusionary Coverage,
also known as “Bumper to Bumper” Coverage. Where the Named Component plans
name what’s covered, Bumper to Bumper plans name what’s NOT covered. The
exclusions are usually limited to items such as brake pads, brake shoes,
batteries, glass, body exterior, carpet, light bulbs and other normal
maintenance items.
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Wrap Programs. These are
the policies to consider if you already have a manufacturer’s warranty with
long-term powertrain coverage. You don’t need a full extended warranty
since you’ll be purchasing double coverage. The cost is less than a full
warranty.
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Learn about the “extras”
that come with some plans. These might include emergency 24-hour roadside
assistance, with towing, battery, flat tire and emergency lockout assistance;
fuel, oil, fluid and water
delivery service; and trip interruption coverage. The payout
benefits vary from company to company, so look for companies that offer higher
dollars to you. Also, some companies may offer this program for only one
year. Make sure to get this benefit for the entire term of your policy.
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Find out how repairs are
paid for. If you buy an extended warranty, do you really want the hassle of
paying for the repairs yourself and waiting to get reimbursed? Although the
reimbursement process is not always lengthy, most companies do pay repair
facility directly with a credit card or by another arrangement. Make sure the
contract states that repairs can be paid for with a Visa or MasterCard. And
ask the company providing your warranty if it allows repair claims to be filed
online. If the answer is ‘yes,’ the company is on the leading edge of the
warranty industry. And finally, make sure claims can be filed anytime during
regular business hours in your time zone.
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If your car is not currently
under the manufacturer’s warranty,
don’t be put off if the extended warranty company requires a vehicle
inspection. In fact, you should be put off if they DON’T require an
inspection, as that represents a ridiculous risk that any prudent insurance
company would never take. An extended warranty company should not be expected
to take on the risk of protecting a vehicle that might have pre-existing
problems. (The same analogy can be drawn to life insurance companies, which
require physical exams and/or blood tests prior to issuing coverage for new
applicants.) Once everything is verified that the vehicle is in good shape,
you get your coverage. The inspection process is usually hassle-free,
depending on the warranty company you decide to go with. The company may have
a network of mobile inspectors that can go to any location you desire or they
may have fixed facilities for you to take your vehicle to.
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See if the warranty is
transferable to a new owner, in the
event you decide to sell your vehicle. There is a small transfer fee, usually
not more than $50, but it’s a worthwhile investment. Should you decide to
sell your car with the extended warranty, you give the potential buyer of your
automobile added comfort.
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Check out the satisfaction
and refunding agreements. Most contracts offer a 30-day money-back guarantee
if you’re not satisfied. Some go a step further to offer pro-rata refunds
when you sell or trade the vehicle; these
refunds are determined by the greater of the days in force or the miles
driven, less a $25 or $50 cancellation fee. To make it simple, let’s say you
buy a six-year/100,000 mile warranty for $1,000. If you sold the vehicle
after two years, you would have had the policy in force one-third of the total
time. Your refund would be about $641. That’s approximately two-thirds of
your initial cost, less $25.
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And finally, once the
warranty is in place, make sure you keep up on the suggested scheduled
maintenance. Extended warranties may help ease the cost of repairs, but they
won’t take care of the car for you!
Let’s face it, life is already
expensive and stressful; maintaining a vehicle doesn’t have to be.
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