DEALERSHIP EXTENDED WARRANTIES

The dealership is a "middle man" and gets a nice commission for each policy sold. You will surely pay more for the policy, and perhaps get less coverage with more restrictions (for example, having your repairs done by the dealership). Independent extended warranty companies have no "middle man" markup and can, therefore, pass this savings along to you. In addition, competition among these companies gives you better prices and better coverage. Be wary of companies that purport to be "independent" but have a reciprocal relationship with a dealership, including online dealerships! They are probably inserting a "middle man" between themselves and the consumer. If your dealer offers you an extended warranty, get a copy of the contract and compare it with contracts available through independent warranty companies.

INDEPENDENT VERIFICATION

Better Business Bureau (www.bbbonline.org)

Is the warranty company a member of BBBonline? Can you look up its BBB report (www.bbb.org). Does it display (on it's main page the BBBonline reliability symbol? Does clicking on the symbol take you to the company's BBB history? If so, how many complaints have been filed? How many unresolved? Are there any specific negative comments by BBB about the company? (Be careful here, sometimes the BBB makes negative comments about the industry, rather than the specific company. For example,  [Note: AWR Editor's comments are in brackets]: "General Advice: When considering the purchase of a service contract, it is important to weigh the costs of the contract against the cost of possible repairs of the product [AWR Editor's comment: good general advice, however, both a short- and long-term comparison must be included]. Compare the service contract of the manufacturer's warranty to make sure your coverage will not be overlapping [AWR Editor's comment: redundant coverage is not the only criterion to be applied; others include what are the non-redundant coverages provided by the extended policy and the higher costs for an extended policy if you wait for your manufacturer's warranty to expire -- also, most companies won't provide a bumper-to-bumper policy (basically equivalent to your manufacturer's warranty if the manufacturer's warranty has expired); extended warranties for new cars still under the original factory warranty are typically the least expensive; if you wait you run two risks: (1) escalating prices in general (the quote you get TODAY is only good for today) and (2) falling into the "used vehicle" bracket based on expired factory warranty and/or mileage, which means higher prices]. Be aware of vaguely worded exclusions or limitations in coverage or maintenance requirements which, if not followed, would allow the company to deny coverage. Find out how repairs are paid for and if you must obtain prior authorization. Also learn about the financial backing of the contract".

Do not take BBB information at "face value".  Each BBB is an independent entity and there is no national standard for reporting.  They also will list complaints without due diligence regarding the legitimacy of the complaint.

Larger warranty companies will typically have more complaints filed against them because they have more customers.  The number of complaints is not particularly important.  What is important is what the company did in its efforts to resolve the complaints.

Auto Warranty Reviews Online (www.autowarrantyreviews.org)

Is the warranty company a member of Auto Warranty Reviews? Does it display (on it's main page the Auto Warranty Reviews symbol? Does clicking on the symbol take you to the company's Auto Warranty Reviews history? If so, how many complaints have been filed? How many unresolved? Auto Warranty Reviews is an important listing because it is the only service dedicated to evaluation of ONLINE extended warranty companies.

WebAssured.com (www.webassured.com)

Is the warranty company a member of WebAssured? Does it display (on it's main page the WebAssured symbol? Does clicking on the symbol take you to the company's WebAssured history? If so, how many complaints have been filed? How many unresolved? Does the Company Description make unsupportable commercial claims (e.g., being the number 1 provider on the internet of extended warranty policies; how would they possibly know the truth of such a claim? do their competitors provide them with comparative sales information? In a word: NO.) Apparently, WebAssured does not screen the information submitted by the warranty company.

Other credible sources include NetCheck (www.netcheck.com) and  Truste (www.truste.org). 

INSURANCE COMPANY BACKING

Does the warranty company provide the name of the insurance company that it is backed by or affiliated with? Is a link provided? Are the insurance company ratings provided? Are the ratings "A" or better and provided by AM Best, Standard & Poors, or Duffs & Phelps? Does the warranty company use evasive language to imply that it is backed by an insurance company, such as the use of escrow accounts? This does not mean true "insurance", since the escrow is only as good as the company itself. Serious warranty companies are affiliated with insurance companies and many states require this.

Do not purchase from a warranty company that is not backed by, or a member company, of an "A" or better rated insurance company.

Know the difference between the primary insurer (which also may be the Plan Administrator) and the re-insurer.

LICENSES

Is the warranty company licensed to sell extended vehicle warranties in (at least) their home state? If so, who is the Regulatory Agency? Have complaints against the company been filed with them? Are they under investigation? As stated above, many states require that an extended warranty company be backed by an insurance company with an approved rating. Check the requirements for the warranty company's home state and see if they're in compliance. If not, avoid them.

WARRANTY COVERAGE

Does the warranty company have ONLINE coverages viewable for each of their different types of policies? Is there a statement that the coverages are EXACTLY (or highly similar) the same as you will receive in your contract? Are the coverages written in "plain English" rather than "lawyer-speak"? Does the warranty company NOT list its coverages but refer you to a telephone number of a sales person in some form (for example, Customer Service, Finance Manager). Avoid companies that do not make their coverages for EACH policy available online. Find out what the warranty doesn't cover. You may have to do this comparison yourself, since it is often not stated online. How many years and/or miles is the policy in effect? BE WARY OF BUMPER-TO-BUMPER COVERAGE! If "wear and tear" is NOT included (or is not available as an option), it is not bumper-to-bumper coverage! Also, Bumper-to-Bumper coverage should always be stated in EXCLUSIONARY terms (specifically, what is NOT covered).  Policies that are stated in inclusionary terms, or in both exclusionary and inclusionary terms must be read very carefully so that there is no misunderstanding regarding what is and what is not covered..

REPAIRS

Does the warranty company allow you to use the repair facility of your choice? Does it have to be ASE certified?  (A note of caution: some dealerships won't install third-party parts, and some warranty companies won't pay the higher cost for dealer parts.)  If you plan on getting your repair done at a dealership, be sure that they will honor your extended warranty (most do). How are the repairs paid: by you with reimbursement submittal to the warranty company? or, immediately via the warranty company's credit card? If your breakdown occurs away from home, does the warranty company provide reasonable living expenses while the repairs are being made? If you have a deductible, does it apply to each repair VISIT or each COMPONENT? How much is the deductible? Does the company offer options on deductible (many companies will allow you to lower your deductible for a small increase in price)?

Most importantly, be sure that you maintain your vehicle in accordance with the manufacturers specifications and that you keep records to show that you have done so.  This is a frequent reason for denial of a claim.

EXTENDED WARRANTY TRANSFER

Is your extended warranty transferable in the event you sell your car? (This is an important bonus for you in terms of getting a higher resale value or sale closure for your vehicle. For example, if two people were selling the exact same car at the exact same price -- and one had an extended maintenance warranty and one did not -- which would you choose? The answer would seem to be obvious. Bottom Line: do not buy an extended warranty that is not transferable to the new owner of your vehicle!

PAYMENT AND GUARANTEES

Does the warranty company accept major credit cards? Do they offer an installment plan? Do they offer a money-back guarantee? If yes, what are the terms? ... no money back after X days? full money back within X days? prorated refund throughout policy period? Do not buy from companies that neither offer nor honor their guarantees.  Most companies offer a full refund within 30 days and a prorated refund thereafter, depending on claims filed.

ADDITIONAL BENEFITS

Does the extended warranty plan provide additional benefits for: towing?, road service?, food and lodging? rental car?

WEBSITE SPECIFICS

Does the company make "pie-in-the-sky" commercial pitches that are unsupportable (e.g., being the number 1 seller on the Internet of extended vehicle warranty policies, being the only company backed by a standard insurance company as opposed to a risk reduction group insurance company)? If so, be wary. Request that they provide proof to support outlandish claims. Does their website contain all of the information stated above? Does their website make finding the information easy? Do they provide "free" online quotes? Are the quotes actually given in "real time"? Are these quotes actually "free" or do you have to provide them with your name and e-mail? If you obtain a quote, but do not order a policy, do you receive, after a few days, a "discount coupon via e-mail"?; if you do not respond, do you receive, after a few more days, a "double discount coupon via e-mail"?  Does the company continue to send you periodic marketing e-mails? There is nothing essentially wrong with such an aggressive marketing strategy, but we find the practice annoying and it begs the question: If their original policies are competitively priced, how can they come back and offer you discounts of $100 or $200? Also, do not provide your privacy information to a web site that does not specifically state that the information will be protected and will not be re-sold. Does the warranty company provide "real time" ONLINE ordering of their policies, as opposed to channeling you to a sales person in one form or another. This may or may not be a negative. Many consumers like to talk to a real person and get their questions answered directly ... and some companies do believe that this allows the consumer to make a better informed decision. However, our opinion is that ONLINE ordering should be an option that is available to the consumer. Is their online ordering system secure (this will be indicated by a padlock or key in your browser's status message line)? Never provide credit card or other financially-sensitive information through an unsecure transaction.

We hope these tips are useful, and save you mistakes and money,