How to Analyze a Used Car Extended Warranty

It’s no surprise that no two used car extended warranties are the same. It’s up to the consumer to take the time to sit down and not only review the warranties but analyze the companies that are backing the warranties. Consumers who know that they are going to purchase an extended warranty when buying a used car must use the same amount of diligence in analyzing the contract of sale as they do the extended warranty contract.

Difficulty: Moderate

Instructions

1. Review the auto parts and systems covered. Some companies offer several used car warranty contracts that varying levels comprehensiveness. For example one company may offer coverage for the engine and all internal lubricated parts and stop there. The same company will offer a second plan that includes everything in plan one plus the transmission and al it’s lubricated parts. It goes without saying that the more comprehensive the coverage the more costly the warranty.

2. Analyze the deductibles and how they apply. Some used car extended warranties apply deductibles on a per visit basis. That means that every time you bring your car into the shop for a warranted repair must pay a deductible. Other extended warranties charge a deductible on a per repair basis. Therefore, bringing your auto to a repair shop three times to repair the same problem would mean you would only have to pay the deductible once.

3. Look for repair shop limitations. Some extended car warranties stipulate that you must bring the vehicle back to the same shop that sold the warranty. Other contracts are more liberal and allow you to bring your vehicle into any repair shop. Before selecting a warranty, consider what might happen if your car requires repair while you’re away from home.

4. Find out if the contract pays via reimbursement or on your behalf. When you bring your car to the shop for a warranted repair, find out if you have to pay the amount due and submit a bill and proof of payment to the warranty company for reimbursement. If so, consider the time lag it takes from the time you pay for the repair and your reimbursement. The better option would be to pay your portion of the repair in the form of the deductible and the company picks up the remainder of the repair bill. The second option is much more favorable for individuals strapped for cash.

5. Check the financial stability of the company that holds the warranty. A warranty is only as good as the financial backing of the warrantor. In today’s tumultuous economic times, this is especially important. Manufacturers that were long thought of as financially stable are having financial difficulty. Before purchasing an extended car warranty for your used car, do a little research to make sure that the company will be around to pay when you need them.

Tips & Warnings

• Research the history of your car’s reliability. If the make and model of your vehicle is known for its reliability and mechanically sound construction, maybe you should consider putting money away monthly an interest bearing account to pay for the occasional car repairs instead of purchasing a used car warranty.

Resources

• About Auto Lemon Laws
• Cheap Car Doesn't Have to Mean Old Car

[sweetspirit]

on 8/8/2009 Very good! Thanks. 5*s

[gahazeleyes]

on 6/15/2009 Very informative. Thanks

[giantsteps]

on 6/6/2009 Excellent points. So many buy used cars warranties without checking all of these things out first.

[goodselfme]

on 6/2/2009 Good points to consider on used car extended warranties.