Automobile Extended Warranty

Beware Of The Automotive Extended Warranty

There exists a pattern in the new and used car market where the salesman (or the F&I person) will hard-sell you on the purchase of an "Extended Warranty" for your new or used vehicle. While having a warranty on an automobile is absolutely always the preferred way to drive it, a purchaser must be very savvy when hit up for the purchase of said warranty.

If someone is buying a new car, it will most likely come with a minimum of a 3/36 warranty - 3 years or 36, 000 miles, whichever comes first. A serious problem arises when, for instance, the engine blows up at 36, 005 miles. Then the consumer gets to argue with the dealership's service manager and chase the claim all the way up to Detroit (or Tokyo or Korea, whichever is applicable). It will not be fun. If you are dealing with a reputable dealership (which are hard to locate, I know), then your claim under warranty will be "good willed" and the repair will be taken care of by the company. If you cannot get the right people's attention, then you will be forced to pay for and eat the repair cost or sue the company. That, too, will not be a joy. I've seen people whose manual transmissions have failed due to water ingestion, yet the company would not repair it even though the transmission had a clearly leaking seal. The most egregious of insults I have witnessed is when a dealer would not repair a high-performance engine under warranty simply because the PCM (Powertrain Control Module) stored a code that reflected the fact that the driver had revved his engine to the "redline." What the company chose to ignore was the fact that the PCM contained a "rev limiter" which electronically prevented the engine from exceeding the "redline" although allowing the engine to reach the "redline." It is obvious to any technician when a high-performance engine has been downshifted and therefore caused an over-revving condition.

However, just the mere fact that the engine touched the rev-limiter is not cause for disqualification for repair under warranty. If the car has an automatic transmission, for instance, it is nearly impossible to over-rev the engine due to the electronic and hydraulic systems inside the automatic transmission. Now, if the car has a manual transmission, it is very possible to over-rev the engine but there will be lots of other evidence to support that assertion - bent pushrods, bent valves, broken rocker arms, destroyed lifters or tappets, etc. So, if a person finds himself with a major warranty issue which is not being addressed to his satisfaction, he should go into the dealership loaded for bear and with as much outside diagnosis as possible from other shops as to the true failure and why it should be covered under warranty. He should not pull any punches and insist that his position is correct.

As far as a used car goes, there exists another problem. When a person buys a used car (or "pre-owned" as some dealerships like to say), the purchaser will be pressured to also buy an extended warranty on the vehicle. While I vigorously support the purchase of some extended warranties, I want to strongly stress that it all boils down to the fine print. A used car buyer should always take the time to read every term of the warranty and here's why - some warranties are good and some are junk. If the purchaser reads the fine print and finds that the warranty actually only covers him if the engine block breaks in two, then that's not worth anything to him. You have as much chance of an engine block cracking in two pieces as winning the lottery. But, if the fine print states that repairs such as all "electrical, hydraulic, computer modules, engine internal parts, oil and fluid leaks, emission control, complete driveline repair from engine to transmission to axles, climate control, body systems (including sunroof, power windows, power seats, etc.), and electronics" are all covered at 100% with no or little deductible, then the purchaser has a good deal on their hands and should buy the extended warranty without a doubt. Just be very careful to read the fine print and to know what you're buying.

A purchaser should not expect for "wear items" like brake pads, clutches, and tires to be covered by any extended warranty except perhaps one offered by the manufacturer. While a four-wheel brake job on a high-end car might cost $1200, a transmission failure would set a person back up to $6000 and that amount should definitely cover the cost of any extended warranty. It's a gamble no matter what.

I had one client who had an automatic transmission issue. After a lengthy test drive, I diagnosed the problem as a slipping fourth gear clutch as well as a failing torque convertor. Luckily, he had about a month left on his extended warranty so he got an entirely new transmission for free. I had another client who just couldn't find anything wrong with his SUV after 90, 000 miles, so he kind of lost out on his extended warranty purchase. It all boils down to piece of mind and for me, having the solid warranty with the good fine print is worth the extra money every time if you plan on keeping the vehicle past its factory warranty.