By admin
How much insurance does one need? You have the big four: home, health, life, and car insurance. Then there’s a second category, which starts getting a little hazy with credit card insurance, purchase protection plans, fraud insurance and more. Extended warranties, also called extended service contracts, or extended service policies fall into the mist of this second category.
Extended warranties are supposed to pay (in full or in part) for specified repairs for a specific period of time after the expiration of the factory warranty. They can be a great value. They can also be a significant waste of money. It gets quite foggy in the details. What exactly is covered? How long? How much? Are there hidden charges?
There are numerous extended warranty companies and an even wider variety of warranty packages available: silver, gold, platinum, platinum-plus, and a host of other confidence-building words. What’s the best plan, and are extended service contracts worth the money? Extended warranties, like life insurance policies, are a numbers game. They’re a gamble. You pay $2500-$4500 for a 2 year, 100,000-mile protection plan and hope that you get at least that back in warranty repairs. The provider on the other hand, hopes to pay out less than it insured.
There are three major types of plan providers: The manufacturer, the dealership/third party, and third party providers. Each one has its assets and liabilities (discussed ahead).
What exactly is covered in an extended service plan? As mentioned above, what’s covered depends on the package purchased. Some plans only cover the power train: the mechanical components of the engine, transmission, and rear-end. Others cover the power train plus some electrical components. Still others cover electrical, advanced electrical, and computer components. Some only cover what’s listed in the contract. This is called a “Stated” or “Named” contract. This means that if it’s not stated, it’s not covered. Some cover bumper-to-bumper, similar to a manufacturer warranty, except trim pieces, upholstery, exterior components, cosmetic items, and a number of other exclusions.
Never before has the adage, “The devil’s in the details,” been so applicable.
Manufacturer Extended Plans:
Extended service plans from the manufacturer are the best in terms of coverage, convenience, and quality. Coverage is similar to the warranty while the vehicle was under its original factory warranty—with similar exclusions stated above. The billing is direct, meaning you don’t have to pay out-of-pocket, except for a deductible, if applicable. Quality is great too, as an extended warranty from the manufacturer will only use factory parts. They also have money, so there’s less risk of bankruptcy.
The down side of manufacturer extended service plans is that they are not cheap. These plans are generally the most expensive, require low mileage standards, and necessitate servicing your vehicle at a dealer for coverage.
Dealership/Third Party Plans:
Extended warranties from a dealership are actually from a third party insurer. These providers are “generally” reputable, but not always. However, if there is an issue (such as the warranty provider filing chapter 11, which is quite frequent in the extended service contract business), the dealer “may” step in to cover any repairs that would have been covered under the defunct plan. Also, claims are easier: billing is direct because the dealership has a working relationship with the provider, and there is usually agreement on price.
Some dealers set up their own “internal extended warranty,” which is honored by the selling dealer. This is rare, and should not be confused with a manufacturer warranty. Important: extended warranties are often passed off as “manufacturer” warranties. They’re not. This is a sales trick. Also be aware that there is a significant mark up, as the dealership is merely acting as the middle man. Lastly, extended warranty companies often go bankrupt without warning.
Third Party Plans:
These plans are called third party plans because they are outside the responsibility of the manufacturer and the service center performing the repairs (unless there’s a working relationship with a repair shop as stated above).
There are hundreds of extended service contract companies. Some have good reputations, some don’t. Third party plans are frequently sold by used car dealers. You may also receive an official looking notification in the mail stating that your warranty is expiring, and directing you to call an 800 number ASAP. This is a marketing tactic by an independent warranty provider. Despite the “official” appearance of the postcard or envelope, it’s not from the manufacturer. Manufacturers do not send out reminders about warranty expirations.
Given the wide-variety of third party plans there are numerous red flags.
1) Claims: Extended warranty companies will be quick to tell you that filing claims is easy, and that the service center gets paid immediately via a credit card. Thus, there’s no out-of-pocket expense for you. However, the warranty company can’t dictate a service center’s policies. Some service centers will only accept payment from the repair customer. Thus the burden is on the repair customer to fill out the forms, contact their warranty company, and await reimbursement via check, which can take 2-8 weeks.
It is the service center’s responsibility to contact the extended warranty company to let them know what’s wrong with the vehicle and to check coverage. This process can take anywhere from 20 minutes to 20 days, sometimes more, depending on the degree of repairs and especially the amount. (See $1000 and Adjusters ahead)
Service centers and extended warranty companies frequently battle over the “fair” price of repairs. Many repair shops no longer negotiate, and just state the price, leaving the contract holder (i.e., the service customer) responsible for the difference.
2) Rentals: Rental coverage is a great benefit. However, there are fixed rates and time limits. In other words, the warranty company is not going to pay to have you drive a Mercedes-Benz, even if you drive a Benz. Rental allowances range from $25 to $35 per day. Also, rental coverage is based on the number of hours it takes to repair the vehicle, NOT how long your car has been at the shop.
3) $1000 and Adjusters: Repairs that approach $1000, or that require a significant amount of work, will be cause for the warranty company to call in an adjuster to confirm the diagnosis. This will delay the repairs by a minimum of 24-48 hours. It may cost you additional money when an adjuster is involved. You may be charged to have your vehicle pulled back into the shop for inspection, as well as for the time spent with the adjuster.
4) Tear-down Charges: In many cases, an extended warranty company will require that a particular component be taken apart for inspection to determine if the repair is indeed needed and covered. This puts the service customer in a very awkward position. The customer will have to authorize potentially hundreds of dollars of tear-down expense in the hopes that the repair is covered. If it’s not, the customer is out the hundreds in tear-down PLUS the actual repair. This does happen!
Common Myths:
1) “Extended warranties cover maintenance services and brake work.”
No. Extended warranty plans do not cover maintenance or wearable items. Brake pads and rotors are wearable parts. Maintenance such as coolant, brake and transmission flushes, tune-ups, services, oil changes, bulbs, wipers, and more are not covered.
2) “They told me it’s bumper-to-bumper, so it covers everything right?”
Wrong. Not even a factory warranty covers everything. When pitching the sale for the extended warranty, one is very often lead to believe that he or she will have nothing to worry about. This is just not true on so many levels. For example, if your bumper falls off it’s not covered.
3) “I don’t have to pay anything, right?”
Wrong. Despite the claims of 100% coverage, there are many factors involved. The labor rates, labor hours, diagnostic times, parts prices, and machine work are just a few items that often conflict with a service center’s policies. Some extended contracts only pay a maximum of $55 per hour, and only allow one half hour for diagnostic time. This is generally unacceptable to the service center, as labor rates have skyrocketed to over $100 per hour at many dealerships, and average $75 at local shops. Moreover, with the complexity of today’s vehicles, diagnostic time is at a premium. The customer pays the difference.
4) “If I have an expensive problem, I can just purchase an extended service contract.”
It’s unethical, but it’s an option many attempt. However, most service contracts have a minimum time requirement before the first claim can be filed: usually three months. Also, many contracts require that your vehicle be inspected by a service center to check for pre-existing conditions—just like life insurance.
5) “My contract lasts up to 100,000 miles.”
Only if the time limit doesn’t run out first. All extended warranty plans have a time limit. For example, a typical contract will state that the vehicle is covered for two years or 100,000 miles, which ever comes first. During the sales pitch, however, the emphasis will be on the 100,000 miles, not the time.
6) “If my car breaks, it gets fixed like new.”
Actually, depending on the contract, an extended warranty company can insist on installing remanufactured or even used parts.
Items commonly not covered by extended warranties:
• Any component with a pre-existing condition
• Any component related to a Technical Service Bulletin (TSB)
• Many components that has been updated by the manufacturer
• Extra components necessary “due to manufacturer updates” to complete the repair
• Trim pieces: molding, cup holders, dashboard, console, body parts, glass
• Many accessories: radios, DVD players, TVs
• Many expensive electronics: climate control units, navigation assemblies
Service contract positives:
Some service contracts are transferable, and may thus increase the resale value of a vehicle. Many come with trip interruption reimbursement, towing and 24-hour road side. Some plans can also be financed, or have E-Z Pay Plans. Others offer a money-back guarantee.
What should you do?
You’ll get lots of advice about doing the research, comparing plans, and reading the fine print. This is all sound advice. But what about doing the math?
Let’s say a plan costs $2500 for 2 years or 100,000 miles, whichever comes first. To break even you’ll need a minimum of $1250 per year in covered repairs, excluding regular maintenance. Remember covered is the vital word here.
Another way to break it down is to anticipate having to pay $104.17 per month over the next two years in “covered” repairs. Do you want to take that bet?
What could happen?
You could double your money or more in repair work. You could conceivably get a new engine and transmission (or used ones anyway). You could also easily spend $2500 for a service contract, and still have to pay another $2500 for repairs, which for a variety of reasons, were not covered under your plan. Now you’re out $5000.
Alternatively, you could keep the initial $2500. In many ways all an extended warranty does is prepay for repairs. You could stick the money in the bank and collect interest. Then you could withdraw the money for repairs as needed.
Another consideration that’s rarely discussed is the cause of the problems. Many car repairs problems are the result of wear and tear, neglected maintenance, physical damage, or acts of God—such as flood damage. None of this is covered. The gamble only covers failed components.
If the vehicle you’re driving does cost $2500 to $4500 in repairs due to outright failed components, is it a vehicle you even want to consider keeping? A vehicle that needs this kind of repair work due to mechanical, electrical, or computer failures may not be worth it. The $2500-$4500 would be better spent on an upgrade to a quality vehicle rather than insuring a lemon.
There’s no question that auto repair is expensive, and even quality cars break from time to time. But do they breakdown to the tune of $2500-$4500? That’s a hefty bet on a “possibility.”
Terence O’Hara from the Washington Post makes an excellent assessment about extended warranties in general. He writes:
…extended warranties play upon a basic human trait to avoid loss, even if it means sacrificing a possible future gain…the gain is all the other things of value that a consumer could buy with the money that was spent on a warranty
What’s the best plan?
Money in your bank account!
By admin
In today’s day and age, it’s normal to need a loan from time to time. Everything from buying a car to a home to dealing with unexpected medical or college bills can seem overwhelming. Additionally, investing in and maintaining a loan is a great way for people to build up a credit history. You can find loans that are specific to the item you want to invest in - cars, houses, and college loans - or you can find loans that are more generic and can be used for personal purchases. When it comes time to invest in a loan, there are many things to consider.
When looking or applying for loans, you should consider the amount you really need. You should always know exactly what you need before you start applying for loans. This is the best way to find interest rates that are as low as possible. Also, if you know exactly how much money you need, then you can a lending institution will be more likely to give you a loan because it shows you have done your research. Additionally, think about how long you wan to have this loan for: some are for only a year whereas some loans can last for a number of years.
Additionally, look into your credit history so that you know the kind of interest rates you can expect. If you have a questionable credit history, then you may have accept higher interest rates than if you have a better than average credit rating. When you look into your credit rating, then you should consider requesting a full report so that you can make sure everything is correct. If there is a mistake on your report, you can have it fixed, and this in turn could raise your credit score.
Always know what you can pay per month: You may not have enough money for the purchase or service you need, but you should be able to make the loan’s monthly payments. Be sure to not only figure in the loan’s amount but also the interest rates. If you are honest with yourself about what you can pay per month, then you can be sure that your credit score will increase.
Always shop around when it comes time to find the right loan for you and your needs. You never know where you are going to find the loan with the lowest interest rates for you and your credit history. Try everywhere from big and small banks to credit unions and credit card companies. If you know what’s out there, then you can find a loan that fits what you can pay per month and has competitive interest rates.
If you do a little research into loan’s interest rates and into your own credit score and history, then you can be sure to find loans that fit your needs. All it will take is a little time and energy, and you will be well on your way to funding your next big purchase or expense.
By admin
Many women like home décor. Home decoration is a must to do thing if you want to get comfortable living in your own home. There are many things you can use to get great decoration in your home. But, actually home decoration always changes every year. If you want to save your money and looking for one good decoration’s stuff that able to use in long time, you can choose area rugs. People use area rugs from time to time. If you have area rugs in your room, you will never need wallpaper anymore. Area rugs have beautiful design and many advantages. Sometimes, people purchase it to reduce noise inside their rooms.
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By admin
What are the advantages of getting your next auto loan online? Well, the first advantage could be time. You are going to save an ample amount of time by researching your purchase and the interest rates for car loans online. It can take up more time than you might think to travel from car dealer to car dealer in order to see how much the car you are interested in is going to cost you, and how much your interest rate is going to be. All this can be done at home when you take advantage of online auto loans.
Most people have heard about how you are able to get the very lowest rates possible on an auto loan when you procure the loan from an online lender. This is quite true. Many online loan companies have on their web sites an interactive widget that will allow you to compare automobile loan rates from many other loan company’s websites in real time. The highest of these auto loan rates are always going to be less than what your local car dealership will offer you.
Another advantage of an online auto loan is that you generally do not have to pay any sort of processing or application fee in order to apply for - and receive - an auto loan. This alone will save the person looking for a good loan deal some money.
With an online auto loan, you have the chance to do research on what type of car you want to buy. You can be sure of what a good price for a certain make and model of car will be, as well as its interest rate, before you even set foot into the automobile showroom. You can always count on getting a better deal when you have the facts and figures you need to help you to make a decision.
An advantage that most people know nothing about until it magically starts to happen to them is the fact that you only have to fill out ONE loan application. That lone application will be sent to more than one dealer. As quickly as about ten minutes from the time your application is sent, you will start to receive contact from multiple dealers, all eager to sell you a car. Sometimes this is by telephone, depending, of course, on the time of day. And, sometimes the initial contact from a dealer is via email.
You will have your choice of lenders, as it is almost a given that more than one of them will contact you. You can afford to take your time here as well, as no one is going to rush you, or try to make you believe that your good loan deal is going to disappear if you don’t hurry up and take advantage of it. You can do research on the lenders who have offered you a loan before you choose which one to go with. The advantages to getting an auto loan online are many, and best of all, they all benefit you.
