New Car 101 Buying Guide:

Extended Auto Warranties

Here you'll find our Top Ten Tips and Comprehensive Guide

Top Ten Tips (the essentials)

• To get peace of mind and financial protection against costly and unexpected auto repair bills buy an extended warranty that gives you VALUE. Do NOT buy a warranty based on price alone. There are HUGE differences in the coverage offered by different companies and policies.
• In most cases you will pay much less for a policy that is equivalent to what the dealer offers, if you buy from a company that services the policies it sells (A Direct Seller); A policy from a Direct Seller will allow you to bring your auto into any shop, including any dealer, certified by the National Institute for Automotive Service Excellence.
• For the best price and greatest protection buy your extended warranty before your new car warranty expires. You can still get good coverage for a vehicle not under warranty but it will cost more for less coverage.
• Comparison shop to get quality coverage at the best price. When you compare quotes be sure you consider the VALUE you are getting from the policies you compare. Get FREE no obligation quotes from our recommended Direct Sellers: Warranty Direct and 5 Star Warranty. They can save you up to 60% of what you would pay for a warranty from a dealer. A dealer is a middleman. Buy direct and save big!
• To Insure you get the protection you pay for: buy from a financially stable company with a reputation for excellent, no hassle customer service. Look for companies that service the policies they sell, belong to BBB and/or Web Assured, and either insure their policies DIRECTLY with an A rated Insurance company or have substantial assets themselves.
• Always ask for the best promotional pricing. (The companies we recommend have frequent specials advertised right on their web sites.)
• Buy true bumper-to-bumper protection with a 0$ deductible. Bumper to Bumper coverage protects your whole car and only excludes specifically listed items. This is your best value, is similar to your original factory warranty, and will give you the most peace of mind. Warranty Direct's Secure Care + and plan offers this kind of policy. 5 Star Warranty offers ONLY Bumper to Bumper exclusionary coverage.
• Buy an extended warranty that covers mechanical breakdown, wear and tear, and overheating. All three.
• Buy a warranty that includes rental car reimbursement, towing, and roadside assistance 24/7.
• Buy a warranty that is transferable when you sell your car.
• To be sure claims under your extended warranty are accepted, follow the manufacturer’s maintenance guidelines and immediately stop driving your car if it overheats or has a failure.
• Insist on getting a copy of the policy you think you want to buy BEFORE you buy it and then make sure you UNDERSTAND it before you sign. Even between quality companies like our recommended providers, Warranty Direct and 5 Star Warranty. there are important differences in coverage that you must understand to know what you are getting for your money. The Comprehensive Guide below delivers the details you need to understand the different types of coverage.

Attention California Residents

We know of only two warranty companies authorized by the California Department of Insurance to sell extended warranties online. The first company to be authorized was Warranty Direct, and more recently 5 Star Warranty. We think this approval speaks volumes for the credibility of both Warranty Direct and 5 Star Warranty because it means they have past the scrutiny of a government regulatory agency, something other extended warranty companies do not have to do. To make matters even better, both companies are offering coverage in California that is comparable to the excellent coverage they offer in the rest of the US!

Comprehensive Guide to Extended Warranties

In this sections you will get detailed answers to questions about the different types of extended warranties and how to get a quality extended auto warranty at a great price.

Definitions

1. What is an extended auto warranty?
2. What are the different levels of extended warranty protection and what do they cover?
3. What is “wear and tear” coverage?
4. What level of coverage should I buy and for how long?
5. How much will it cost me to buy an extended auto warranty for my car?
6. When is the right time to buy an extended auto warranty?
7. What company should I buy an extended warranty from? What factors should I look at to help me decide what company to buy from? Should I buy from a dealer or online?
8. I’m not sure if I want to buy an extended warranty. How do I decide if purchasing an extended warranty is a wise decision for me?
9. What do I need to do to be sure that my extended warranty claims are accepted?

Answers to FAQs

1. What is an extended auto warranty?

An extended auto warranty is a service contract extending the coverage of your car manufacturer’s warranty. For example, you buy a Honda which comes with a 36 month or 36,000 mile manufacturer’s warranty from Honda and you decide you want warranty coverage that extends beyond the term of the manufacturer’s warranty so that you wind up with a warranty on your car for five years/100,000 miles in total. When you buy a policy like this the original warranty covers the first 36 months/36,000 miles and the extended warranty covers the balance.

2. What are the different levels of extended warranty protection and what do they cover?

There are three basic levels of extended automobile warranties:

A. Bumper-to-Bumper Protection

This coverage is exclusionary coverage meaning that it covers any and everything that goes wrong with your vehicle EXCEPT for certain reasonable stated exceptions. The exclusions are similar to your factory warranty, primarily cosmetic items (seat fabric, carpeting, body molding) consumable items (tires, battery, wiper blades) and routine maintenance like oil changes. Some "bumper to bumper" policies include emmission coverage as part of their basic coverage, while for others it is an additional cost extra.

True bumper-to-bumper protection is the level of protection that is similar to what comes with a new car and it is the level of coverage that we strongly recommend you purchase for your car. With this level of protection you can feel confident that you have comprehensive protection for your vehicle. If you can afford the additional cost of this type of policy, often only two or three hundred dollars more than component coverage described below, it is well worth it.

5 Star Warranty and Warranty Direct offer bumper to bumper protection policies which also include comprehensive emmission protection. Warranty Direct calls its bumper to bumper protection SecureCare + has a similar product called Diamond coverage. Warranty Direct offer products that are in addition to their bumper to bumper protection that include emmission components and luxury items like GPS Navigational equipment. Warranty Direct and 5 Star Warranty emmission coverages' includes thirty components.

All Policies from Warranty Direct and 5 Star Warranty include FREE 24/7 roadside assistance for the FULL term of the warranty. The policies of both companies include car rental reimbursement and travel interruption benefits.

 B. Named Component Auto Warranties

These warranties cover only components specifically listed in the policy. If it is not listed, you have no coverage. There are two basic categories for this type of coverage.

1. Comprehensive Component Auto Warranties The most complete component auto warranties contain a long laundry list of parts including: engine (including turbo), transmission, electrical, electronics, air conditioning, steering, drive axles, fuel delivery, suspension, brakes, anti-lock brakes and much more. This type of policy offers substantial protection but it is not exclusionary bumper-to-bumper coverage and does not cover hundreds of components included in the bumper-to-bumper policies. If your budget does not permit you to get the exclusionary level of protection this policy is a reasonable compromise between price and coverage. Warranty Direct calls this type of coverage Xtracare+. Like all their policies it covers wear and tear and damage due to overheating and includes FREE 24/7 roadside assistance for the FULL term of the warranty . You also receive car rental reimbursement and travel interruption benefits.

2. “Big Ticket” Component Auto Warranties This level of protection covers a more limited list of components then the comprehensive named component warranties. They cover 12 major components including: Engine, Transmission, Tur bo/Super Charger, Transfer Unit (4x4), Drive Axles, Brakes, Air Conditioning, High Tech Electronics, Steering, Electrical, Front Suspension, Sport Utility Features and Seals and Gaskets. Warranty Direct calls this type of protection MajorCare and it comes with all the usual features of their policies stat ed above.

C. Wrap Warranties

Wrap warranties are for vehicles that have powertrain warranties that run longer than the original factory bumper-to-bumper warranty. The manufacturer’s powertrain warranty only covers about ¼ of the vehicle’s parts. These include the engine, transmission and drive train components. A good wrap policy will cover the remaining ¾ for the same term and gives the level of protection as an exclusionary bumper-to-bumper policy. If an item is not on the list of exclusions, it’s covered. The exclusions are similar to your factory warranty, primarily cosmetic items (seat fabric, carpeting, body molding) and consumable items (tires, battery, wiper blades). Routine maintenance is also excluded (oil changes, tune-ups).

We highly recommend this type of policy if you have a vehicle that qualifies.

Warranty Direct calls this level of protection PowerWrap+ and it comes with all the full features of their policies like coverage for wear and tear, overheating, 24/7 roadside service, and car rental reimbursement.

 

3. What is “wear and tear” coverage?

Wear and tear covers repair of parts that wear out but do not actually break. Examples are parts like struts, piston rings, and valves. This should also include a part that is obviously on its way to breaking, for example, a window mechanism that is not going up and down smoothly, but hasn’t completely broken yet. Warranty Direct and 5 Star Warranty. include wear and tear in all their policies.

4. What level of coverage should you buy and for how lon g?

We recommend the bumper-to-bumper exclusionary coverage (like Warranty Direct SecureCare+ or any policy from 5 Star Warranty). If you can make a budget for this don’t even think about anything else less. (Of course, your vehicle has to be eligible for this level of coverage but most new vehicles or vehicles still under warranty will be.)

How long a policy to buy? Using SecureCare+ as an example,you can extend your warranty up to seven (7) years or 100,000 miles. We recommend buying the maximum mileage available, which is 100,000 for SecureCare+. You'll need to do some math (sorry) to figure out how many years to buy. For example, if you drive about 15,000 miles per year in six years, you will drive 90,000 miles total so you would get the six-year policy to take advantage of maximum coverage.

5. How much will it cost me to buy an extended auto warranty for my car?

Caution: Do not. DO NOT buy an extended warranty by price alone. As you can see from the discussion above on the types of warranties, not all warranties are created equal. Not even close. You should carefully evaluate the coverage as well as the quality of the service you can expect to get from the company you select.

To help you quantify what it costs to purchase an extended warranty here are some examples of prices available from Warranty Direct and 5 Star Warranty.

(This table is being updated!)

We strongly recommended that when you buy an extended warranty that you purchase a bumper-to-bumper exclusionary policy like Warranty Direct's SecureCare+ with $0 or $100 deductible. The exclusionary policy does cost several hundred dolla rs more than a component policy like XtraCare+ or Emerald Max but the potential value is so much more than a few hundred dollars. When you buy the bum per-to-bumper protection, you know you are covered with no out of pocket for most anything that can happen to your car if it is not one of the limited exclusions things like normal maintenance, cosmetics (upholstery, paint…) tires, batteries, things that you would not expect coverage for anyway. This coverage is your best overall value and will give you peace of mind.

We have compared Warranty Direct’s and 5 Star Warranty's prices with other direct sellers of auto warranties and have found them to be extremely competitive and an excellent value overall. They are much lower than dealer warranties.

Obtain a current no obligation quote for your vehicle from Warranty Direct or 5 Star Warranty now.

6. When is the right time to buy an extended auto warranty?

If you want the greatest protection at the lowest price, buy your extended auto warranty soon after you purchase your car. You are not paying for duplicate coverage because the pricing of your extended warranty takes into account any remaining time for the manufacturer’s warranty. You get a lower price when you buy earlier and you protect yourself against price increases based on the increasing cost of repairs. In addition, another benefit for many of us is that you have handled this important protection NOW and don’t have to worry about forgetting to buy it at a later time. In no event should you wait until the manufacturer’s warranty has expired. Even if you still can get coverage you will probably have to pay for a pre-coverage inspection and may have a waiting period before your coverage starts.

7. What company should I buy an extended warranty from? What factors should I look at to help me decide what company to buy from? Should I buy from a dealer or online?

It is important to purchase your extended auto warranty from a reliable company that can sell and back up a policy with those essential features that we have highlighted in this fact sheet.

These features are:

• The warranty policy is purchased directly from the company that will administer your claims. That way you know who you are dealing with and you don’t pay for a middleman like dealers who try to sell you extended warranties.

• The warranty includes coverage for BOTH breakdown and wear and tear as well as for overheating.

• Warranty can be canceled within 60 days, no questions asked, if no claims are made.

• The company has a good reputation in the industry and belong to BBB and/Web Asured.

• Financial stability of the company is established by either having it's policies DIRECTLY insured with a "A" rated insurance company or the company has substantial assets and takes a portion of the contract money received and deposits it in an insured claims reserve account and reinsures its policies with an A.M. Best “A” rated company so that you will have recourse even if something unexpected happens to the finances of the company you buy from.

• The warranty is transferable when you sell your car.

• The warranty can be purchased after you buy your car. You don’t have to buy it at the same time you purchase your car.

• The policy includes 24/7 roadside assistance or towing, car rental and travel reimbursement.

• Repairs can be done at any ASE repair shop.

• The warranty company accepts claims from your repair shop on your behalf and pays the repair shop directly.

Our Recommendations

Warranty Direct because they meet and exceed all of the above standards and excel in customer service. They offer great VALUE in their policies by including all of the above features in ALL of their policies! Warranty Direct is a well established, financially stable company and is member of both BBB and Web Assured. They have set the industry standard for Direct Sellers of auto warranties.

Our second recommendation goes to 5 Star Warranty. Although a much smaller company than Warranty Direct, their policies are directly insured with an A- (Excellent) rated insurance company which you gives you solid protection. Feature wise their policies are comparable to Warranty Direct and they are committed to customer satisfaction. They belong to both BBB and Web Assured.

8. I’m not sure if I want to buy an extended warranty. How do I decide if purchasing an extended warranty is a wise decision for me?

To purchase or not to purchase an extended warranty is a personal decision for you to make but here are some factors to consider.

• Limit your liability for repairs. An extended warranty is a way for you to shift the risk and cost of repairs to your vehicle to another party. To do this you pay a certain premium. Ask yourself if you want to self-insure and thereby assume the risk of unexpected bills for repair of your car or do you want to put a limit on expected out of pocket expenses for repairs by purchasing an extended warranty policy? Automobiles have become more reliable on the one hand and considerably more costly to repaironthe other. Buying a quality policy (from a good company like Warranty Direct) effectively puts a ceiling on your spending for car repairs for several years.
• Keep your vehicle in top shape . If you have a quality warranty in place, you will most likely bring you vehicle in to be repaired as soon as it needs work. The cost of the repair will not cause you to procrastinate bringing your car into the shop. Remember with high quality warranties from a company like Warranty Direct repairs required by wear and tear are covered. You do not have to wait until a part fails to get it replaced. Because you will get your vehicle repaired in a timely fashion, you will enjoy the benefits of keep ing your car maintained at a high level of performance.
• Lock in the cost of repair. Costs of automobile repairs are on the rise. For instance, replacing a transmission in 2004 cost $1700 on average with cost projected to be $2738 by 2009. Purchasing an extended warranty soon after you buy your car effectively locks in the cost of repair for your vehicle.
• Length of Ownership. Ask yourself how long you expect to own your new car? If you plan to only have your car for a year or two and will sell it before the original manufacturer’s warranty expires, then purchasing an extended warranty will probably not make sense for you. On the other hand, if you plan to own you vehicle for several years, then you will want to seriously consider purchase of an extended warranty.

9. What do I need to do to be sure that my extended warranty claims are accepted?

The most important thing you need to do is to perform the recommended maintenance specified by your car’s manufacturer. Get those oil changes etc. that are required and save your records. When you take your vehicle to your repair shop be sure they secure approval from your company before they proceed.

Important: Before you buy you policy, confirm with your repair shop and potential extended warranty provider, that they have worked together or can work together, some shops have had bad experiences with certain companies and may refuse to accept their coverage

Don’t misuse your car. Extended warranties do not cover damage caused by your misuse of your car. If your car overheats, has some other failure, or starts making suspicious noises, you must stop using it. Do not expect that damage resulting from using your vehicle after there is a failure is going to be covered. Use common sense.

 

Extended Warranty Company Profiles

Warranty Direct Company Profile

Warranty Direct is the consumer division of Interstate National Dealer Services, one of the nation's oldest and largest vehicle service contract firms. This 25-year-old company has the experience of nearly 2 million contracts sold. When looking at extended warranty companies, financial stability should be of utmost importance; after all, you will need them to be there down the road to pay your claims. Interstate has been named to the Forbes Magazine list ofthe “Top 200 Small Companies in America ” THREE times. We feel it’s important that you know who you are buying from. They are NOT an internet only company; they have a long history of selling plans through wholesale channels.

When it comes time to pay your claim, you can count on Warranty Direct. They are expert at reserving the proper amounts of money. With assets in excess of $140 million, you can be sure sufficient funds are available to pay your claim. Last year alone, they paid over $40 million in claims, and over $400 million in their 25 years in business. Of course, all their contracts are insured for an even greater level of consumer protection.

Customer satisfaction is their top priority. This can be seen in their Better Business Bureau report (no complaints in over 15 months covering over 100,000 claims-as of December 1,2004) and over 75 verified customer testimonials at WebAssured.com.

There's a reason over 2,200 car dealers, banks and credit unions sell their coverage, comprehensive coverage, no hidden fees or restrictive contract clauses and fast claims handling. Their experience is unmatched in the industry. Over 18,000 dealers and repair facilities do business with them. They have invested millions of dollars in infrastructure, which allows them to be a leader in claims handling. With over 50 people handling claims, they authorize repairs quickly and efficiently.

Unmatched company stability, financial strength, unsurpassed coverage, and the best benefits in the industry means less risk for you.

(Information supplied by Warranty Direct)

 

5 Star Warranty Profile

5StarWarranty.com is the on-line consumer division of Coast to Coast Financial Services, LLC.

Coast to Coast has been in business since 1993 offering automotive related products such as extended warranties, gap insurance, credit life insurance and many other ancillary products to automotive dealers, banks and credit unions nationwide. Our senior management team has over 100 years of combined experience in the automotive industry and automotive warranty business.

All of our service contracts are directly insured (not risk retention group) by an AM Best A- (Excellent) rated insurance company. Our insurance company has been in business for nearly 100 years.

With the combined experience of our management team and insurer you can feel secure when purchasing a 5 Star Warranty service contract.

(Information supplied by 5 Star Warranty.)