Extended-Warranty Warning #auto #seller


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Extended-Warranty Warning

By Jessica L. Anderson | December 2009

You must read the fine print on your car warranties.

John Pallay of Mansfield, Ohio, found out the hard way that automobile extended warranties can be a raw deal. Pallay recently wrote to Kiplinger’s to relate his tale of warranty woe: When he bought a used 2002 Pontiac Sunfire nearly three years ago, he also bought a $2,000 extended warranty from National Auto Care (now called NAC). Since then, Pallay writes, he has shelled out $1,400 for repairs — and his policy has paid just $30. Some parts that needed replacement were excluded from coverage. Other repairs weren’t covered because the breakdown was caused by a noncovered part.

Hit and miss. Extended warranties consistently inhabit top-ten lists of consumer complaints for a good reason: They often make it difficult to cash in. The language may, for example, obfuscate what is covered and what isn’t so that you end up footing the bill instead of the company backing the contract. The fine print may include a per-item deductible instead of a per-visit one, meaning you could rack up several deductibles in one trip to the shop. Diagnostic fees may not be covered if the part that’s found to be causing the problem isn’t covered. The reimbursed labor rate may be less than what your shop charges. And the warranty may be subject to termination if you don’t follow its maintenance schedule.

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Some high-profile warranty companies have gone bankrupt, leaving customers in the lurch. And some 40 state attorneys general have investigated a massive phone and direct-marketing campaign that was waged last year. The companies involved sent out mailings that appeared to be from a car dealer or manufacturer to sell often-worthless warranties.

If those caveats don’t scare you off, the high cost of extended warranties may. According to F it’s better if the dealership is paid directly. Finally, haggle for a lower price. The Consumer Reports survey found that 75% of people who negotiated won a discount.

If you do sign but develop buyer’s remorse, don’t throw up your hands. In most states, you have the right to cancel within 30 days of signing a contract if you haven’t used the policy.


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