You have seen them advertised, you get the dreaded phone call about your car’s extended warranty, when you buy a used vehicle from a dealer, they want to sell it to you and to put it in the price. That’s right, I am talking about aftermarket warranties.
Some people don’t know exactly what an aftermarket warranty is or what it does. They see on TV that Ice Cube says he uses It, and other stars endorse them, and couldn’t live without them. I can give you the skinny on them from the repair garage’s prospective. If you come to the garage, you know, I like to take things apart, break them and repair them to make them better. Kinda like my old man.
The big thing is you have to read the fine print (what little there usually is) I have been in the shop full time since 2014 (wow it’s been ten years). In that time, I have seen exactly one service contract pay for everything, but the deductible. I have dealt with upwards of 100 of them. So, you have roughly a 1% chance of getting a good one that will leave you with a small repair bill all the time. Now I like to gamble, but right off the bat, I say that’s a bad bet. The other thing is that the math, doesn’t math. Most of the time, my customers come with these contracts after they bought a new used car and paid anywhere from 1000-6500 dollars depending on the cost of car. With an engine repair costing anywhere from 4500-6000 dollars for used or remanufactured, no company can stay in business shelling out more money than what they brought in, unless you are the government, then you just borrow from China. Normal businesses cannot stay in business that way though.
The way they stay in business is to have what they call exclusions or non-covered repairs and parts. So, anything that is considered a wear part like: tires, brakes, shocks, wheel bearings, air filters, oil changes, bulbs, wipers, hoses, ac charges, belts and they will consider sometimes engines or transmissions to be a wear part. The next thing they like to exclude is fluids, gaskets, seals, & O-rings. So, if you got past that, you are probably thinking, “Well then what do they cover religiously” The answer is sensors, although not tire sensors, radiators, rack and pinion, axles, driveshafts, sometimes engines and transmissions depending on the situation. The average repair bill that they cover is roughly 500-700 at a shot. I had one that covered a transmission, but 3 others would not cover it.
Most of these contracts also have a time and mileage limit on them from 30 days to 3 years and 3000 to 100,000 miles. I have one that has a lifetime warranty. Murphy’s law says that major repair, is going to happen 3 days after your contract expires, and if you call up and ask them pretty, please with cherries on top, they are going to laugh at you. They will not and don’t have to cover something after the contract period, no matter how mad you get. Any threats of revenge are useless because they already got their money from you, there are still way more suckers out there to get, and car dealers have this down to an art form to be losing any form of income from you not being happy.
There is a hassle to also using an Aftermarket warranty. Normal process: is you make an appointment, bring your car in for repairs or maintenance, we call you for the repairs estimate, we get it done in the allotted time we gave you, whether it’s a day or day and a half you come and pay for repairs, get the keys and drive away. The way it works with a service contract: You make an appointment, bring your car in for repairs, we call you for the estimate, you mention you have a service contract but need to locate the paperwork, I usually get a phone number 45 minutes later, I call it and get put on hold for anywhere from a half hour to one hour, I go through repairs needed, we go through times and part numbers sources and warranties, they tell me what your deductible is and what parts and labors are covered, I then contact you with the findings and the ok to start the repair, we get the repair done, I submit for payment, they take from anywhere one hour to most likely 24 hours to get back with payment, which I verify, and then call you for pickup. Now if you are one of my regular customers, I will let you take the car as soon as it is finished. If not, you are waiting until they paid their portion. There is a lot more hoopla with service contracts.
If you are looking for a way to make it hurt less at repair time you have a couple of options. The first thing you want to do is get a prepurchase inspection when buying the used vehicle. That inspection will give you a rough idea of problems, or maintenance needed and a rough time frame. Example if your tires are at 5/32 in April and it’s your daily driver you are most likely going to need tires for winter. You then have bargaining power on the price. If you are me, you squirm a little on the inside about price haggling, but I promise you it’s worth it to try. Put that money in your savings for the future repairs, forgo the contract and make your own. Take the money that you would have paid for the service contract and put it in a high interest savings account. You don’t even have to do it all at once, just keep socking a bit away at a time. When it comes to the time for repairs, guess what you are covered. Want to do brakes, tires, bulbs, oil changes and a state inspection? Who’s going to tell you no? It’s guaranteed coverage 100% of the time with no deductible.
The only way I would even think about an after-market warranty is if it is 100% free, no extra charge. Most of the time these are only for 30-90 days. Then my prerogative would be to get it in to my shop, get what work would be covered under the warranty done. That should give me a slight boost up on future repairs. My thinking would be along the lines of, if they are going to chip in for 10-50% of it, and the only thing I had to do was get the prepurchase inspection done, so I know what it needs, put that inspection to good use and make use of that warranty. That is the only way I would even consider an after-market warranty.
I personally, after working with them, don’t endorse them. They cost way more than they are worth in time, money, and false security. The fine print tends to exclude so much, it’s like a high deductible health insurance plan. If you already bought it, you are stuck wanting to use it, but don’t get your hopes up that it will cover anything. It’s better to save for repairs on your own, then you can say yes to repair, without the muss fuss and stress that the aftermarket warranties cost, and whatever money you don’t use on the car, can go towards the next one’s purchase or repairs.
As always I am here if you need me.
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