Third-Party Extended-Warranties

Consumers are often offered extended warranties by car dealers when they purchase new or used cars.  Extended warranties can be great products. They offer peace of mind in the event that your vehicle needs repair after the manufacturer’s new car, or dealer’s used car, warranty runs out.  But there is an important thing to know about extended warranties, though – they are not all created equal.  The ones offered by reputable car dealers are fine but many third-party ones aren’t. Here’s what you need to know:

What does “third party” mean?

A third-party warranty is so named because it is not directly involved in the transaction between two parties. In the case of a car sale, the first party is the car dealer and the second party is the customer.  A third-party is another entity that gets involved, such as a company selling an extended warranty.

You need to be careful

As we mentioned, a third party extended warranty offered by a reputable car dealer is bound to be a good product but the others out there can be iffy.  The problem is that many seem to have great coverage and are quite affordable but the companies that offer them don’t seem to be around for long.  And those that are still around, never seem to cover the parts that fail on your car due to numerous exclusions.  The bottom line is to be aware that many third party extended warranties aren’t really that good.

A Few Helpful Tips

Third-party extended-warranty problems are so widespread enough that the Federal Trade Commission (FTC) issued a consumer alert on its Web site a long time ago. Here are some of the FTC’s tips to avoid problems along with our own.

Stick with the manufacturer – The best way to avoid extended-warranty scams is to choose coverage with a manufacturer’s extended warranty. For example, if you buy a Chevy and General Motors offers an extended warranty, you can be assured this is a solid product. These warranties will cost a bit more but at least you’ll have the peace of mind that your vehicle is in the right hands.

Research the company – Considering a third party warranty? Google the company that offers it and look for any complaints and feedback from customers. Also consider checking with your state’s Consumer Protection office. Another spot is the your state’s Better Business Bureau web site.

Know what’s covered and what isn’t – This is often the biggest source of confusion when it comes to extended auto warranties. Although they are called extended warranties, they usually don’t function in the same way that your original “bumper-to-bumper” warranty does. Think of these as service contracts that minimize your costs in the event of high-priced repairs, not for the minor things that original warranties do.

In general, don’t be afraid of extended warranties when they come from your reputable local car dealer.  They can be a great product that eliminates risk if you decide to keep your car for a long period of time.

Article Courtesy: Thompson Mazda


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