What’s the difference between a manufacturer’s warranty and a third-party service contract?
Your car is one of the most expensive investments you will ever make, possibly second only to your house. And of course, cars break down, something that can be expected to happen more and more the older they get. Car repairs can be very expensive as well as extremely aggravating and nerve-wracking. So whether for peace of mind or to avoid potential expense, many people look into extended warranties. Unfortunately, lots of them are total scams.
New cars come with manufacturer’s warranties, usually for three years, though a few automakers offer four or five years, or even more. Once your warranty is up, you’re on your own, unless you buy an extended warranty. This can also be from the manufacturer, or it can be what’s called a third-party warranty. The latter is more correctly referred to as a service contract, since it doesn’t meet the technical definition of a warranty. But people like to call them warranties anyway. Basically, a company that is not at all connected to your car’s manufacturer agrees to pay for repairs to your car in exchange for a monthly or annual fee.
Not surprisingly, third-party warranties are usually cheaper, often much cheaper. But what exactly do they cover? And who does the repair? And what parts do they use?
A manufacturer’s warranty will use mechanics trained and licensed by your automaker and will only install official brand name parts produced for and licensed by them. The other guy’s fine print, by comparison, usually allows them to use generic parts and the cheapest mechanics and garages. This of course will have a serious effect on the resulting reliability of your car.
And if you do end up needing any sort of repairs, you may be shocked to realize at that point that the fine print on your contract leaves out whatever it is that’s broken. This happens all the time. Significant parts of your car may not be covered at all, or the dollar amount for repairs or towing may be capped, or your deductible may even be multiplied by the number of broken parts on your car. These businessmen aren’t stupid. They’ll tell you on the phone that it’s a “bumper-to-bumper” warranty. If you ask specific questions or request to see the agreement in writing, the sales agent knows how to deflect and obfuscate. Pretty soon, you’re paying for something you don’t remotely understand, and the scammer is making all that money, knowing they’ll never have to pay back more than pennies on the dollar.
Speaking of the sales agent, it is precisely the sales process that the scammiest aspects of extended warranties come to the fore. You may be cold-called or receive an official-looking of frightening letter in the mail warning you that your warranty is expiring. They may even know your car’s model and year. They’ll use misleading language and/or visuals to make you believe that they are in some way affiliated with your automaker. They’ll build a sense of urgency, implying that you could go broke if you don’t get covered. And if you don’t agree to their offer right away, they have the rhetorical tools to get you on board. An amazing deal that expires today, painless cancellation policies, you name it — just agree. Don’t fall for it. Do your research. Check out the company’s reputation, be totally clear what they cover and what they don’t, and never ever allow yourself to make a spur of the moment decision under pressure.
If you think you’ve been the victim of an extended warranty scam, contact the fund recovery experts at MyChargeBack.