Am I wise to purchase an extended warranty?

Question

I bought a new '05 Mustang GT last year, and the car came with a 3-year/36,000-mile factory warranty. Now I'm at 35,000 miles, and I'm thinking that I may keep the car awhile longer. But I'm leery of the idea of owning an out-of-warranty car. I've gotten plenty of offers from Ford (and other companies) in the mail offering extended warranties. I've also heard these things are sometimes not worth the paper they're printed on.

Any advice?

Answer 1

Do you even need one? Extended warranty policies can be very expensive. The cost will vary based upon what is covered and the length of coverage If you decide to buy one, don't let the dealer sell you the wrong extended warranty. Be ready and know your stuff when you purchase an extended warranty.
Steps

1. Decide to buy or not to buy Lets not get the cart before the horse. The first step in this process is to decide whether or not buying an extended warranty is right for you. To do that consider the following:
2. It's probably not covered. Most people loose money on extended warranties. On average less than 2% of the money collected by the seller of an extended warranty is likely to paid out in claims. These plans are so profitable that the plan sponsor usually pays a commission of up to 50% of the selling price of the plan back to the selling dealer. In fact, the dealer will probably make more money off the sale of an extended warranty than will be made from the sale of the car itself.
3. You don't have to decide today. Don't be pressured to make a decision today. They may tell you the plan is only available on "new" cars and therefore a purchase decision must be made today! Malarkey! Don't believe it. If fact, you may want to delay buying any warranty until the vehicle's factory warranty is almost over to avoid plan overlap with your extended warranty.
4. You don't have to buy it where you bought the car! Since there is so much money made from these plans, the sales staff may be inclined to say anything to induce you to make a purchase decision today. Don't fall for that. A quick Internet search will return literally hundreds of companies that sponsor plans that can be purchased nearly any time. One the other hand, buying a plan when you buy the car may allow you to finance the price of the plan into the vehicle purchase. This option may not be available if you delay purchase. Before making a decision here, talk with your bank or credit union. They may be able to hold back a sum sufficient to make an outside extended warranty purchase.
5. How likely is your car to break? This can be a complex question. If the vehicle is new, if you take care to follow the maintenance schedule; and if you don't abuse the vehicle (like letting a teenager drive it), then it is unlikely that you vehicle will break in a time frame and a fashion that would be covered by an extended warranty. Manufacture's defects (that are likely to fail early) will be cover by the manufacturers warranty. These plans are written to protect the plan provider, not you. Remember, if you take care of the car, and it didn't break during the warranty, it is not likely to break later. A used car in another matter entirely. Unless you know how well the car was taken care of, you may want to consider purchasing a plan. Even here though, be careful. If the car can be replaced for $x dollars, just how much can you afford to spend on insuring that loss. As a rule of thumb, never exceed 10% of the purchase price when buying a plan.
6. How about a FREE extended warranty! There several companies who manufacture automotive chemicals (BG products and Wynn's are two that come to mind) and offer FREE extended warranties when you perform the factory required maintenance using their products. Why pay for what you can get free?
7. In case you haven't figured it out I don't generally recommend to my fiends and customers (30 years in the car business) that they buy an extended warranty. They are usually a waste of money...Having said that however, they are not entirely without value. If you have a history of missing the scheduled maintenance, if you have teenagers in the family or you just have bad luck, it may be worth it to you. If you decide to not to buy (smart) you're done, if you decide you got to have the piece of mind that a plan can proved (maybe smart) keep reading.
8. Not insurance. In some states, provinces and counties, these extended warranty plans are not considered insurance policies and as such are not subject to the insurance regulations that a life or health insurance company must obey. In those states where the "plan" is not insurance, extended warranties fall under the same regulations that other warranties do. Check with you local authorities for more information.
9. Read the contract! It is shocking how much is not covered. For example. Your brakes start making noise. The front pads are worn out and have destroyed the steel brake rotors. Repair cost more than $300, guess what...not covered. Brakes are considered maintenance. Car dies on the road. Towed in (which may or may not be covered) the shop finds out the plug wires, plugs etc need replacement and again not covered.
10. Who decides if it covered? The short answer here is that the company decides, but what happens if you don't agree? For example, a coolant hose blows out on the highway and it isn't safe for you to stop. You continue to drive to the next exit where you can safely stop. Because you didn't stop right away, the engine has been damaged. This type failure would normally be covered...but...because you didn't stop right away, the company declines the claim. Now what? You need to know before you buy the plan.
11. What else is covered? Does the plan cover towing and if so, what are the distance limitations. Can you tow the car to the facility of your choice or simply to the closest? If you break down out of town, is lodging covered, how much, how long, etc? If you car is laied up for a while, how about a rental car, and what about a cash advance if you are really stuck?
12. Find out if they pay for initial diagnosis. Outrageous true story. A customer who had an extended warranty came into my shop with a complaint of intermittent operation of the speedometer. Because the problem was not always present, the diagnostic procedure ran into several hundred dollars. After the dash had been pulled we discovered a faulty connector to the instrument panel. The replacement connector cost $42.50 and the diagnosis was $300. Since this customer's plan did not pay for diagnosis and had a $50 dollar deductible, the customer collected nothing! Cars today are easy to fix, they just are hard to diagnosis. Make sure you plan pays diagnosis!
13. Pay Market Rates? When a claim is submitted, the claims adjuster decides how much he is willing to pay the shop for a covered repair. This may seem like it is good for the consumer, but it not. The adjuster cares only for how much he has to pay. For example: Shop:The car needs a new widget and it cost $159. Adjuster: I can buy that part from a dealer is Mississippi for $112, the most I can pay is $112, period. Shop: But this is Los Angles, things cost more! Adjuster: Too bad, thats what we are willing to pay, take or leave it. Shop: Fine, I'll take it, the customer will pay the difference! (or the shop might just use a lower quality part) Squeezing the service provider is not a good thing. Only the warranty company benefits, both the customer and the shop loose!
14. Check the deductible. When buying car insurance there can be a significant saving in premium with higher deductible. Extended warranty plans frequently do not offer the same benefit. For example, if you have a plan with a $50 deductible that costs $1500, you would expect that a plan with a deductible with a $100 deductible should cost $750, but often is not the case. Don't be surprised to find the $100 deductible plan cost $1100.
15. Is this a "Captured Warranty?" A captured warranty is typically a plan that is sponsored by the vehicle manufacturer or by a company that has a special pricing arraignment with the vehicle seller. With a captured plan, it can be difficult, if not impossible to use your plan with the service provider of you choice. If your dealer can't get your car in for a week, too bad A capture plan is bad for you. If you get poor service from you dealer and you have a captured plan, too bad, you can't change providers. Captured plans are good for the company, not for you. Choose only a plan that allow you to go anywhere to get your car fixed. You'll be glad you did.


Tips

* Don't believe what the sales or finance departments tell you; ask them to show you the confirmation in writing on the contract for verification.
* Be aware that an extended warranty is not a warranty in the factory sense of the word. It is an third party payer plan, sold by someone else. (even if the third party is a division of the auto manufacturer).
* There are two kinds of extended warranties. The most common is an inclusive policy, which only covers things that are specifically included in the policy details. A better policy is an exclusive policy, which covers everything except what is specifically excluded in the policy. Exclusive policies are considerably more expensive than inclusive policies.


Warnings

* All sales people will say your contract is covered anywhere. This is two-fold; most dealerships will honor the contract, however some will make you pay up front for repairs and collect from your warranty company. This can be a nightmare if the authorisations are not properly obtained.
* Read your contract all the way through; you will be sorry if you don't.

Answer 2

Check the terms and conditions. Many of them actually work more like insurance and require you to put up a deductable for repairs. For example, if you need a $600 repair and have a $500 deductable, the "warranty" will only cover $100 of this. An extended warranty with a deductable like this is almost completely worthless - in my experience, most repairs are only a couple hundred.

I'd rather keep some money in the bank just in case, and not pony up for an extended warranty. Those things are calculates so most people who buy them don't get as much money out of them as they put into them.

35,000 miles is nothing on a car these days, especially if it's highway miles. I have never in my life owned a car with under 40,000 miles on the clock. I wouldn't worry about it.

Answer 3

Ford warranty. I am a Ford Salesman for Pacific Ford L.B,Ca. An extended warranty is used to protect the consumer in the event of certain problems. You need to read and re-read what the warranty covers, mainly engine and transmission, possibly rear end, front wheel drive, etc. Talk to people who work on cars,research. It can help in times of troubles.

Some people say its not worth it, some say get it. Whatever makes you comfortable. Ask around, read, check with the dealer,friends. Do your homework-don,t take others answers. If it helps u sleep at night-do it, just make sure u know what is covered. I am top salesman of the Mustangs. GREAT CAR.

Answer 4

Get the Ford warranty! Make sure not to buy one of these "online" warranties-they are indeed not worth the paper they are written on. Also, make sure that you do not exceed 35,999 miles or 3 years, as then you have to but a used car policy, and they are more expensive. Make sure you buy it from a Ford dealer!

Look at it this way, quite often the warranty is less expensive than whatever is going to break.

Answer 5

i purchased an extended warranty also but when I sold the car I had no idea how to cancel it and get a refund. Eventually I found mywarrantyrefund.com and they took car of everything. So glad to otherwise i never would have got my money back. fyi- almost all extended warranties are cancelable and you will be prorated for the time you didn't use.

Answer 6

If somebody from a save advised me that i could ensure it with shopper affairs (i do no longer comprehend what they call it on your u . s .)? yet i comprehend revenues people on occasion lie with the intention to get a sale. and then i could come to a determination whether or no longer that's well worth getting prolonged guarantee or no longer. yet on a $470 greenback device i in my view does not undertaking with prolonged guarantee.

Answer 7

definately get one u never know what problems might occur. and they are worth it, my dad uses it all the time

Answer 8

sure. what will it hurt?