A Primer on Used Car Warranties

Posted by Adrianna On January - 11 - 2018 0 Comment

The decision process for an extended warranty

Your salesperson will likely tell you that you’re crazy not to get an extended warranty. They’ll walk you through disastrous scenarios about costly repairs that are worth as much as the car you’re buying that could have been prevented if that person had only purchased an extended warranty. While these scare tactics may have some merit (in rare occasions) for most people there are a few key factors which would determine whether or not you should purchase an extended warranty.

Your personal financial situation
First, your own financial situation should play heavily into your decision. If you’re at a point where a major car repair would put you in a financial crunch or leave you high and dry, a monthly payment for an extended warranty might be a smart investment. So, for example, if your job requires reliable transportation and you’re without an alternative means of getting to work, an extended warranty makes a lot of sense. What might otherwise have been a financially crippling repair could become a small deductible payment, and if your plan comes with rental car coverage you’ll still have the ability to get to work.

The value of the car
If you’re purchasing a lower end used car that’s in the final years of eligibility for an extended warranty, the mere math of it may not make sense. If the car is only worth a few thousand dollars, an extended warranty might make up an additional 25% or more of the purchase price. In this case, you may be better served avoiding the warranty and buying a better car with a reputation for being more reliable.

The car’s likelihood of needing costly repairs
You’ll want to do your research before making a purchase not just on the car’s features and overall reliability, but what are the most typical repairs for that make and model. You’ll want to dig into sites like Consumer Reports and other reliable auto review websites to learn more about your typical repairs. Then, when you decide to pull the trigger on your used car purchase, you’ll be able to pick through your extended warranty options to make sure that it specifically covers the most common issues for the model you purchase, as well as the costs of those repairs. If you’re purchasing your first foreign car, for example, you’ll find that many common repairs can be exponentially more expensive than the same repair on a domestic vehicle. If the dealer doesn’t have a plan that seems to match your needs, you can look online after you purchase your car.

Your driving habits and conditions
Another thing to consider when looking at an extended warranty is how you drive. If your car is going to spend most of its time in start-stop city traffic, this wear and tear can age a car much more quickly than a vehicle that will primarily see highway driving. If you’ll be spending your drive time in the city, an extended warranty may make more sense than if your car will be used on a daily highway commute in the suburbs. Additionally, if you like pushing the performance of your vehicle or use it for transporting heavy items you’ll need to take this additional strain into account. Basically, if your vehicle’s going to have a rougher existence than most, you’ll also want to take this into account. However, if you’re going to use the vehicle for commercial purposes (like a construction job) you’ll want to make sure this is known when you set up your warranty so you can’t be denied a claim based on it not being categorized as a commercial vehicle when it actually is.

Your willingness to deal with potential repairs
Finally, the piece that most people overlook in the process of deciding on a used car warranty is their overall mentality to spending and willingness to accept the risk. Every used car purchase comes with some degree of inherent risk. You don’t know exactly how the car’s been treated or what possible malfunctions may be coming down the road. If you’re willing to live with the inherent risk, or if you’re a deft hand in the garage (or know someone who is) then an extended warranty may not be right for you. However, if you’re not someone who deals well with unexpected costs and life’s unexpected hurdles, the peace of mind of a warranty might be well worth it for you.

Selling a car with an extended warranty

Another item many people purchasing a used car may overlook is what the future plan is for the vehicle. If there’s a possibility you’ll be in a situation to resell the car in a couple of years while it would still be under warranty, this can add quite a bit of resale value to the vehicle.

In particular, if you intend to sell the car yourself you’ll be able to draw much greater interest than you would otherwise. Almost all extended warranties are transferable, so if you take out an ad in the local paper or advertise the car on a website like Craigslist, this additional selling point will offer some reassurance to the new buyer that if they run into any issues it won’t break the bank.

Owners with an aftermarket warranty tend to be able to sell their cars MUCH closer to dealer pricing instead of private party value. As you look to sell, you can use the Kelley Blue Book or NADA pricing tools to give you a better idea of your car’s value, leaning closer to dealer pricing.

Don’t get ripped off by the “wear and tear” exclusion

One of the biggest scams in the world of extended warranties is what’s known as “wear and tear” exclusions. This little caveat in coverage basically states that expected issues caused from age, mileage or use will not be covered. Unfortunately, this is so loosely defined in most instances that it gives the warranty provider a lot of wiggle room to deny a claim. Worse, most contracts will list parts like these under “covered components”. Parts that get a lot of wear and tear like CV joints and tie-rods often fall victim to this exclusion and leave policy holders fuming.

You won’t typically find these types of exclusions on warranties backed by the major manufacturers, but if your policy seems too cheap to be true, make sure you go through the warranty with a fine-toothed comb looking for specific verbiage stating that replacing parts that no longer meet the manufacturer’s specifications is the responsibility of the warranty company whether it’s been damaged or not. If you have that in writing you should be spared from any unexpected “wear and tear” surprises down the road.

Save everything and avoid claim denial

If you take the plunge and purchase a warranty for your used car, the one thing any professional will tell you is to make sure you save every piece of paperwork and take meticulous notes of any maintenance or repairs. Warranty companies are like insurance companies, they make more money when your claims are denied so it’s up to you to remove any obstacles in having your claim go through. This means you’ll want as much documentation as you can to assure that any issues can’t be blamed for your negligence. Every oil change, every tire rotation, every fluid change should come with a receipt and be readily available when you make a claim. If you do your own car maintenance, be sure you keep a notepad with very clear notes on dates, mileage, service performed and the products used to perform the maintenance (brand of oil filter, type of oil, etc.) Documentation, in this case, is power.

About the author: Adrianna is a guest contributor from BlueDevil Products. BlueDevil manufactures quality auto care products to help your car operate at peak performance.

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