by Mark Albertson
Extended Auto Warranties
Your car breaks down and you call for a wrecker. You are towed to the dealer where you bought your car. You have an extended warranty so everything should be fine. That is until you go to the service department. There the service writer tells you that the repair is not covered. What? You tell him that you spent $2,500 on your service contract and that you better be covered. But alas, you are not. And why? Because your warranty is for mechanical breakdowns. Seems in this case, the part in question just wore out. So now you have to cough up $750.
Cheer up. You are not alone. Folks find out everyday that the service contract they bought for their car does not cover all or even part of the necessary repairs. As a vehicle ages, most repairs will be the result of parts wearing out. Unless you have a Wear and Tear Warranty, you will not be covered.
Quite simply, a Mechanical Breakdown Warranty covers those parts that break. A Wear and Tear Warranty provides protection for parts that wear out from constant use. When you sit down to do the delivery paperwork on the car you are buying, the finance manager is going to attempt to sell you a service contract. And when he does, the first question from you should be is it a Mechanical Breakdown Warranty or is it for Wear and Tear? You better ask, because if this guy is a snake oil salesman, he's not going to tell you.
One of the best ways of educating yourself is to get a copy of the actual service contract that is being sold to you. You need to do this because the brochure the business manager provides will tell you next to nothing. Keep in mind that you do not need to buy a service contract at the same time you are buying your car. If the business manager tells you otherwise, then you know he is a snake oil salesman and don't be afraid of telling him so.
If you decide that you want to buy the service contract, read it again when you get home. Make sure, if you have not already done so, that you consult with a knowledgeable third party. If you decide to change your mind, return to the dealership and ask for your money back. Your window of opportunity for a full refund should be 30 to 60 days from the date-of-purchase.
New car warranties are usually of the mechanical breakdown type. Depending on the manufacturer, their life span can range from 3 years or 36,000 miles to 4 years or 48,000 miles. However, many service contracts available from a dealership will not cover all of what the original factory warranty did. Why? Because many are written to provide the minimum of protection. Many service contracts view mechanical breakdown as a flaw in the manufacturer's parts and workmanship. This is why some service contracts will not cover wear and tear. The wearing of parts is not a manufacturer's defect. And as stated earlier, the more miles on a vehicle or the older it gets the more repairs will be the result of wear and tear as opposed to mechanical breakdown.
What you want to do is buy an extended warranty that will cover both mechanical breakdown and wear and tear. Examples of wear and tear include burned pistons and worn rings, worn or burned valves, worn or burned guides, valve grinding, leakage from worn seals and gaskets, and failure of retainers or fasteners like nuts and bolts, screws, clamps and brackets. The gradual reduction in the vehicle's operating performance by such parts as ball joints, CV joints, wheel bearings and motor mounts. And make sure that included in any warranty you buy there are provisions to cover overheating and anti-lock brakes.
When you buy a service contract, make sure that you take a signed copy. Make sure your name, the correct vehicle identification number, explanation of benefits and any optional coverage is included. And make sure that there is a notation including the name of the back up insurer.
Lastly, you might want to consider mechanical breakdown insurance. This is an insurance policy or contract like your home or auto insurance. Mechanical breakdown premiums and coverage are regulated by your state's Department of Insurance. These policies usually cover the parts, labor and repair of the vehicle. So when making the comparison to a service contract, you might find that mechanical breakdown insurance is an attractive alternative.
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